On 16th April 2013, Bloomberg Brief (Crisis Watch Section), in a detailed commentary on Malta [i], has recently reached the same conclusions reached on the 10th of April 2013 by the European Commission in its report on Malta’s financial position issued in accordance with Article 5 of Regulation (EU) No 1176/2011 on the Prevention and Correction of Macroeconomic Imbalances (the ‘Commission Malta Report 2013’).[ii]
The Bloomberg author and economic commentator, David Powell, has shunned any comparison between Malta’s state of affairs and the Cypriot crisis, where depositors in Cypriot banks had been warned of the potential for imminent disaster months before. The commentator provides that “The banks of Cyprus became too large for the state to honor its deposit guarantee without external assistance.” Any risk that a similar situation to Cyprus occurs are remote, given that for the Maltese banking system to grow exponentially to an equivalent of the Cyprus’ banks would mean that the deposit-to-GDP ratio would have to expand at the same rate it did between 2005 and 2012 for the next 20 years. On the contrary, this is not the situation in Malta given that event the Malta Financial Services Authority (the “MFSA”) is seeking to limit an endless increase in the potential liabilities of acceptable funding which are not covered by the Deposit Compensation Scheme (DCS).
The commentator concludes that “comparisons between Cyprus and Malta continue to appear misplaced though detail on the composition of foreign deposits in the latter would provide clarity on the potential liabilities of the state”.
This report, coupled to the FitchRatings Report[iii] and the European Commission’s report declaring that Malta does not having excessive fiscal imbalances, have all confirmed that “the Maltese economy demonstrated resilience throughout the crisis”[iv] and have reaffirmed “the confidence that Malta’s banks and finance sector have enjoyed for many years”.[v]
For a detailed analysis of Malta's financial position and it's banking sector, refer to our detailed report entitled 'A Review of the 2013 European Commission's Report for Malta: Malta & Cyprus - a Sea Apart'.
[i] David Powell, Crisis Watch, Malta’s Banking Bill of Health Seems Clean though Clarity on Liabilities may be Required, Crisis Watch – Bloomberg Brief, Economics European Edition, 16/04/2013, P. 2.
[ii] http://ec.europa.eu/economy_finance/publications/occasional_paper/2013/pdf/ocp139_en.pdf
[iii] FitchRatings, Malta and Cyprus: Differences Outweigh Similarities, April 2013, P. 1
[iv] Commission Malta Report 2013
[v] Finance Minister, Professor Edward Scicluna
