For example, a higher deficit means an increase in the public debt of equal amount, and thus more annual interest to be paid out of recurrent revenue. Besides, for the reasons I gave earlier, a higher deficit translates into a wider trade gap (by an estimated Lm7.5 million in the above example). Proponents of more government spending should also bear in mind that even in the absence of the euro adoption factor, Malta would still have to abide by the Stability and Growth Pact (SGP). You might recall that even the British Government, which has no immediate plans to adopt the euro, was called to order by the EU Council some time ago because of its growing budget deficit. Then again, sound public finances are fundamentally a matter of economic common sense and prudence. So much so that in recent years there have been repeated calls on the government from all quarters to reduce the deficit and the public debt. Is it not strange, therefore, that just when headway is finally being made in this very direction, we hear calls for a reversal of this policy and for engineering what would at best be a short-term boost to growth? One should also bear in mind that Malta’s main challenge is to become more internationally competitive. In this respect, an increased fiscal deficit will not solve anything. Malta needs quality growth, preferably resulting from foreign direct investment, which brings with it capital, technology and markets.
Beyond the yearly shadow banking monitoring exercises, policy makers intended to make sure that no part of the financial system would be left unregulated and that a similar set of rules should apply to a similar set of risks. For the sake of a better regulation of globally systemically important institutions, some progress remains possible in the monitoring, and the need for relevant data in particular as regards the better understanding of inter-linkages among G-SII. Cross-sectorial consistency was seen as a key factor to prevent any opportunity for regulatory arbitrage and preserve appropriate level playing field. The Financial Stability Board following the G20 recommendation has launched an ambitious regulatory program which aims at better controlling risks which are related the shadow banking sector. Indeed, the US have recently adopted a regulatory framework for Money Market Funds (July 2014). Other reviews are still ongoing, I am thinking of the assessment of risks and systemicity of asset managers whose assets under management have experienced a major growth these last few years, or the rapid development of ETFs providing real time liquidity on their liability while their matching assets have a lower liquidity. In Europe, this global initiative translated into a number of regulatory initiatives such as the Securities Financing Transactions Regulation (repos and SFTRs) or the Regulation of Money Market Funds. The final objective was to turn the shadow banking sector into a safer and regulated “market-based financing”. 2.