In the five years to 2004, the annual growth rate averaged only 1.2 per cent in real terms, well below that of many of our EU partners; and while this year’s growth rate up to September, at 1.7 per cent, may be encouraging, it is too early to know whether the implied acceleration will be sustained. And yet the need to achieve a faster pace of economic growth has probably never been as urgent as at the present time. Growth is not only necessary in order to satisfy society’s legitimate aspirations for higher living standards. Beyond that, an expansion in the economy’s supply capacity and an enhanced degree of international competitiveness are essential to overcome the daunting challenges the country is currently facing. A threefold challenge: globalization and its implications The first challenge derives from the pervasive process of globalization, which, powered by rapid advances in technology and trade liberalization, has given rise to an unprecedented mobility of resources between countries in pursuit of the best cost-quality combinations. Suffice it to say that over the past two decades exports and foreign direct investment have been growing twice and three times faster than global output, respectively. Globalization is undoubtedly creating numerous profitable business opportunities. At the same time, however, it represents a potential threat for open economies like Malta’s because of the concurrent intensification of competition.
Indeed, banks that wish to be among the first to adopt the AMA must being collecting the required three years of data by the end of this year - but for practical reasons, this process should have begun already. Adopting a more risk-sensitive treatment of operational risk will require significant work on all our parts. What we learn about the factors driving operational failures, and how we can better measure and reduce our exposure to losses, means much more to all of us than simply a more favourable capital requirement. Instead, our efforts on operational risk, combined with advances on the credit and market risk fronts, will advance our understanding of the many risks banks face and improve our ability to navigate them successfully. For all of us, that offers the reward of a more stable banking system that is less susceptible to systemic risks and better able to ensure the circulation of credit to businesses and consumers alike. BIS Review 45/2003  5