Malta Banking Sector Remains Resilient

MEDIA ROOM

The financial turmoil experienced by most European Member states, reconfirms Malta’s resilient banking sector and that of being a country with a stable and robust financial services centre of repute.

Malta continues to receive glowing reviews internationally particularly by the World Economic Forum that has recently ranked Malta as:

  • 13th out of 144 countries in terms of the Soundness of its Banking Sector;
  • 15th as a Financial Market; and
  • 12th for its Regulation of the Stock Exchange.

These measures all contribute towards promoting Malta as the financial services centre due to the reputation it has built over the years, as evidenced particularly within the banking sector.

Malta, together with other EU Member States, has participated in the setting up of the regulatory and supervisory framework for the Euro area, which also includes the European Systemic Risk Board (ESRB) and the European Authorities (ESAs).

As witnessed by external stress tests carried out on Banks at an EU-wide level and also assessments carried out by international organisations such as the IMF, Malta’s Banking Sector continues to excel, especially when compared to other Member States.

The Financial Stability Report that is published annually by the Central Bank of Malta clearly brings to light obvious differences had one to compare Malta’s banking sector to that of Cyprus. As a matter of fact, there should be no comparison at all given the disparities between the financial services model practiced and implemented by both jurisdictions.

The Maltese Banking Sector

Malta’s Domestic banks, that are deemed to be of systemic importance, operate along traditional lines by attracting domestic funds from the domestic market, lend locally and more importantly hold securities issued in Malta. The size of the core sector is only around two times GDP, which is about 50% of the EU average.

Non-core domestic banks as well as International banks, that amount to six times of GDP, play a restricted role both in terms of the volume of operations and banking service operations offered to local residents, having their market almost entirely focused outside of Malta.

The Cypriot Banking Sector

The Cypriot Banking Sector is considered to be relatively huge, financed primarily by offshore (Russian) funds hence becoming dangerously concentrated on Russian investors and depositors to the extent that such deposits are made of “clean” money.

The major collapse of the Cypriot financial system was due to its exposure to Greece, particularly when the Greek sovereign effectively defaulted, Cypriot Bank Assets lost their value almost instantaneously.

As a consequence, Cypriots holding accounts in excess of €100,000 stand to suffer losses as much as 40% of their money, ranking after unsecured depositors and shareholders.

In consideration of these recent developments, Malta had expressed its full support to an adjustment programme that is required by a Member State to re-establish sound macro-economic and financial stability, and shall subscribe to the one-off measures undertaken in respect of Cyprus.