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Malta's Finance Sector, Finances Buoyant: IMF

by Lorys Charalambous, Lowtax.net, Cyprus
27 January, 2016

Malta is among the fastest expanding economies in the eurozone and its banking sector remains resilient, the International Monetary Fund (IMF) said in its Article IV consultation for the territory.

In the area of fiscal policy, the IMF noted that Malta has established an independent fiscal advisory panel. The territory is also looking to reduce the fiscal deficit and debt, including by restructuring state-owned enterprises, it said.

The IMF said the proposed pace of fiscal consolidation for 2016–18 is appropriate. Malta is managing to reduce its deficit, despite rapidly growing current expenditures, due to revenue measures and stronger-than-expected revenues, it said. Malta aims to achieve a surplus of 0.2 percent of GDP in 2018, but the IMF said measures beyond 2016 are not well specified at this stage.

In respect of the financial services sector, Malta is said to have strengthened its regulatory and supervisory frameworks and the IMF reported that the banking system remains resilient, with banks being well capitalized, profitable, and liquid. "Solvency and liquidity of core domestic banks and other peer banks remain above the minimum regulatory requirements, and their profitability is above the euro area average," the IMF said.

The IMF concluded that, given the large size of the financial sector and ongoing regulatory and supervisory changes, continued policy actions are needed, recommending that Malta should:

  • Swiftly implement bank action plans to ensure a level playing field and sound supervision;
  • Develop bank recovery plans and collect contributions for the resolution fund, following the transposition of the Bank Recovery and Resolution Directive into national law and the establishment of a separate resolution unit in the Malta Financial Services Authority;
  • Strengthen the contingency framework, including by reducing the share of special contributions to the depositor compensation scheme fund;
  • Introduce additional precautionary macro- prudential measures, given the rapid increases in mortgages and pick up in real estate prices, and;
  • Continue to coordinate closely and ensure robust implementation of the framework to counter money laundering and the financing of terrorism in line with the 2012 Financial Action Task Force standard.

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