Challenges ahead: The Central Bank of Malta’s prime responsibility is to ensure price stability. From this  perspective the challenge is to ensure that the Maltese economy continues to expand at a sustainable pace, without overheating. It is vital that we avoid the formation of asset price bubbles. The recent global financial crisis has shown the huge costs that can arise when asset prices depart from their fundamental values, eventually jeopardising the financial system and the economy as a whole. At the Central Bank we are keeping a very watchful eye on the price developments in the property market. Earlier this year we have published work by our Economic Research  Department exploring property price misalignment with fundamentals based on an index of 5 separate indicators. It shows that at the end of 2015 house prices were still below their equilibrium fundamental value but nevertheless price trends in this regard will continue to be closely monitored. There are, however, other asset classes which need close observation to avoid formation of asset bubbles. In the current low interest rate environment investors’ search for yield may stimulate excessive risk-taking behaviour. More investors’ education is needed to ensure that there is better appreciation of the risks of unrated corporate debt, especially where markets are somewhat thin. At the same time, we have to recognise that, as members of the euro area, the monetary policy tool is no longer available at the national level.
PRODUCTIVITY AND STABILITY FOR SUSTAINABLE GROWTH  ADDRESS BY DR MARIO VELLA GOVERNOR, CENTRAL BANK OF MALTA DELIVERED DURING THE IFS ANNUAL DINNER  18 NOVEMBER 2016  Dear President and Members of the Committee of Institute of Financial Services (IFS) Malta, personally and on behalf of the Board of Directors of the Central Bank of Malta and of its Senior Management, I thank you for the opportunity to address this distinguished audience. Dear Minister. Ladies and gentlemen. This annual event brings together key stakeholders in this country’s economic development and growth, and in the development of the social, educational and cultural conditions without which economic development and growth are not possible. It is now an established tradition that the Governor of the Central Bank seizes the opportunity of the Annual Dinner of IFS Malta to make a number of factually grounded remarks about some matters in the remit of the Central Bank. The traditional presence of the Minister of Finance at this event is of vital importance because it provides the stakeholders present with a more dynamic view of the whole, in the light of the statutorily distinct roles of the Ministry of Finance and the Central Bank. Before sharing some thoughts with you, I would like to commend IFS for its ongoing commitment to responding to the changing needs of the marketplace and its pursuit of excellence in the provision of financial services education.