Although foreigners, including non-EU nationals, are present in all sectors and at all levels, their employment has increased mainly in professional and administrative support services, and not as is sometimes claimed, in sectors characterised by lower skill levels. The increased employment of foreign nationals across occupations has enabled organisations to grow and venture in new areas. A sudden reversal of this pattern could stall activity in several sectors. Efforts to upgrade the country’s infrastructure should therefore be complemented by measures that prevent a disorderly depletion of foreign human resources and enhance the skills of Maltese nationals. *** Favourable economic developments, although easing somewhat, are expected to continue to buttress financial stability. Lending volumes remain supportive of interest income but pressures on margins persist due to the low interest rate environment. Notwithstanding, profitability remains a challenge for traditional banking models such as those of our banks. In fact, though still comparing favourably with their European peers, the profitability of domestic banks has been slimming. In addition to the limitations on their ability to generate more interest income, banks have to contend with ‘no-fee’ alternative products being developed by fintech players which operate with a lower cost base and hail from a less intrusive regulatory environment. Concurrently, banks are facing a more rigorous and intrusive supervisory approach coupled with more rigorous standards of Anti Money Laundering and Combating the Financing of Terrorism. This is absolutely necessary and has our full and active support.
This sector, which directly contributes to a significant 5.3% of gross value added and provides for the livelihood of over 11,600 employees, is in good health. This is attested by the positive assessments from major rating agencies and the IMF as recently as last year. These conclusions are also corroborated by the results of the CBM’s stress tests which regularly feature in our publications. So let us all rise to the occasion, and work towards preserving the sustainability and reputation of our sector. *** Inequalities are of two broad types: legacy inequalities and inequalities that are consequences of present social and economic developments. Gender inequalities have roots deep in the past. Today’s faster economic growth, however, does bring with its own risk of social shocks. The risk of higher inequality is a case in point. As already announced in my previous IFS address, the Bank has begun to develop a social research capability that focuses on studying inequalities of both types. This is a new experience for the Central Bank of Malta and we are striving, within the limits of available resources, to produce high quality empirically based results by the first quarter of next year. We are, however, striving to go beyond producing knowledge. In our efforts to promote inclusiveness and diversity in the Bank itself, we have made modest but significant steps forward.