Domestic inputs, particularly labour, must be competitively priced. And since the cost of labour in Malta is relatively high, we must increase the value of output per employee. Once again, the only way forward is through productivity growth. In this regard, there is much room for improvement. The level of productivity has remained roughly unchanged since 2001, while it is projected to increase at an annual rate of only 1% to 2% in 2007 and 2008. For a country that is highly dependent on exports, this is not good enough when many of our competitors are achieving faster productivity growth. Faced with this situation, we would do well to reflect on the experience of others. In France, a recent McKinsey report showed how industrial productivity gains slowed sharply in the last five years, causing the country to miss the opportunity to create an estimated 700,000 jobs. As for the reasons, a report by the Camdessus expert group in 2005 identified two major obstacles to growth: first, not enough people work, and those who do work, do not work long enough, due in part to the introduction of a 35-hour working week; second, the heavy State has become a costly drag on the economy. Malta faces a similar predicament for much the same reasons.
Bank supervisors cannot prevent all fraud or illegal conduct or forestall all undesirable behavior in large, complex financial institutions. But we can help create more  BIS central bankers’ speeches  5  resilient, less complex, and better managed organizations that promote, rather than undermine, financial stability. V.  Conclusion  The Federal Reserve will continue to improve its supervision and regulation of financial institutions. We understand the risks of doing our job poorly and of becoming too close to the firms we supervise. We work hard to avoid these risks and to be as fair, conscientious, and effective as possible. Of course, we are not perfect. We cannot catch or correct every error by a financial institution, and we sometimes make mistakes. But in my view, a good measure of the effectiveness of supervision is the improved strength and stability of banks since the financial crisis. Thanks in part to enhanced supervision and regulation, banks “have the ability to meet their financial obligations and continue to make a broad variety of financial products and services available to households and businesses even in times of economic difficulty.”12 I can promise you that we will always strive to improve and that we will work hard to earn and retain your trust. I look forward to taking questions. 12  6  Scott G. Alvarez, Regulatory Rulemakings, Testimony before the Committee on Financial Services, United States House of Representatives, April 8, 2014. BIS central bankers’ speeches