In this way such an institution can serve to unlock further the financial potential available to spur competitiveness and economic growth without adding to the debt burden of the government. The funding model is based on the repayment of loans and thus is on a sustainable path separate from that of the national debt. This is why such loans raised by such institutions are not captured under the Maastricht criteria of debt to GDP ratios. However, such an institution has to be managed and administered in a prudent and responsible manner. 8  BIS central bankers’ speeches  The Central Bank has been looking more thoroughly into this matter and intends to put forward its submissions to the Government with respect to the rationale and feasibility regarding the setting up of such an institution. Conclusion: The importance of sustainability At a time of recession in Malta’s export markets, the preservation of competitiveness is a must, in order to sustain continuing economic growth. In today’s world, economic sustainability requires the adaptation to an evolving external environment and allows the continued improvement of the standard of living without jeopardizing that of future generations. In the eventual post-recession world, many of Malta’s competitors will have gone through a restructuring process and would pose an even stronger challenge. Sustainability has three dimensions. First, a sustainable financial system requires a prudent business model on the part of the banks and other financial institutions and a vigilant oversight of these institutions.
The remaining risk is due primarily to foreign banks’ króna deposits and the old banks’ deposits. However, before the controls on these deposits can be lifted in full, it is necessary to channel as much of this capital as possible into long-term investments and structure the winding-up of the old banks so as not to jeopardise exchange rate stability. Although conditions in the global financial markets are still difficult, they are better overall than they were a year ago, not to mention two years ago. But the fiscal problems faced by Greece, Ireland, Portugal, and Spain have contributed to investor flight to the relative safety of low-yielding markets. The Icelandic Government is faced with the intricate task of demonstrating that Iceland is a better target for investment than other indebted European countries. The progress made under the IMF programme is gradually laying the foundation for enhanced confidence, but the programme will only be successful if we adhere to its objectives. Funds lying in wait in the shelter of low-yielding markets will eventually seek more bountiful shores. When the flight to safety begins to subside and investors begin to seek out better returns, the Icelandic authorities must be ready to direct their attention to Iceland. BIS Review 138/2010  3  The existence of capital controls and their proposed removal represents a problem for both the Monetary Policy Committee and those who trade in the bond market.