Liechtenstein has again received the best Standard and Poor’s rating and the FMA confirmed the country’s financial sector stability. Stable public finances and a healthy banking industry are the basis for technological innovation.
Standard & Poor’s has renewed Liechtenstein’s triple-A rating in a research update on 29th November. The international rating agency reviews its ratings every six months and has not seen any reason to downgrade Liechtenstein from the highest possible rating.
According to the Ministry of Finance, Standard & Poor’s kept Liechtenstein’s triple-A rating in particular because of the solid financial standing of the country’s public finances. A robust public household is a stabilizing factor in times of economic crisis and enables the government to take economic measures if needed.
The rating agency also stated a positive future outlook for Liechtenstein: The country expects a stable economic output in 2019, despite higher investments and increased social spending. Additionally, Standard & Poor’s complimented Liechtenstein’s reliable political system and the proactive implementation of international regulatory requirements.
According to the press release, “Prime Minister Adrian Hasler is pleased with the reaffirmation of the top rating, which cannot be taken for granted and requires further ongoing development. At the same time, the rating confirms Liechtenstein has chosen the right path and the attractiveness of Liechtenstein as a business location.”
FMA confirmes Liechtenstein’s financial sector stability
Likewise, the Financial Market Authority Liechtenstein (FMA) confirmed Liechtenstein’s financial sector stability in its recent edition of the Financial Stability Report. As Liechtenstein does not have its own central bank, the legal responsibility to foster financial stability in Liechtenstein lies with the FMA.
The report assesses the systemic risks in Liechtenstein’s banking sector as low. “While the financial sector – and in particular the banking sector – is relatively large compared to the country’s economic output, high capitalization, healthy profitability, and stable financing reduce the systemic risks,” reads the FMA report.
However, the FMA explains the current international financial market environment also negatively affects Liechtenstein. Although Liechtenstein’s banking and insurance sector suffers less from the low-interest-rate environment compared to other countries, financial intermediaries in Liechtenstein are confronted with increasing challenges to secure their profitability for the coming years.
Financial stability provides the basis for innovation
The overall message of those two reports is clear: Liechtenstein’s public finances and its banking sector are stable.
Setting up shop in a financially stable location is essential for any business, but even more so for blockchain companies. The industry is heavily dependent on access to healthy banks and progressive regulations.
The recent departure of blockchain businesses from Malta proves the point. The reason why businesses are leaving the “Blockchain Island” is that most companies face challenges getting access to banking services. After Malta had been ordered by the EU to get its anti-money laundering (AML) rules sorted – a report by an EU committee in January 2018 stated, “general and systematic shortcomings” in Malta’s enforcement of AML rules – banks have been forced to terminate relationships with “high risk” clients. Many blockchain companies are classified as such, especially if they deal with cryptocurrencies.
Moreover, after Deutsche Bank had cut ties with the Bank of Valetta, it has even become difficult to process US dollars. That’s in particular an issue for exchanges – and probably one reason why Bittrex relocated to Liechtenstein.
A stable financial industry provides banks with more options and stable public finances enable governments to think progressively. The result is a business climate that allows for new ideas and innovation. That’s precisely what blockchain businesses need to operate and grow.