The Malta Stock Exchange has gained 32% since the beginning of the year, while the property market continued to perform buoyantly. A higher level of wealth positively affects consumption and general consumer confidence. On other fronts, however, Malta can position itself better to reap more benefits from this unprecedented scenario of accommodative monetary policy, particularly in the area of access to finance. As just mentioned, the ECB’s monetary policy has enabled significant reductions in lending rates across the euro area. Bank lending rates in Malta did go down but still remain higher than in other euro area countries, as shown in Chart 8. 6  BIS central bankers’ speeches  Chart 8 Bank lending rates and ECB rates  The transmission of central bank policy rates to retail bank rates is an essential condition for the monetary policy transmission mechanism. This is especially important in Malta where the predominant types of businesses are SMEs, which use banks as a main source of financing. In fact, although Malta outperformed the euro area on the main macroeconomic indicators, credit to the non-financial corporate sector has remained subdued, although this partly reflects deleveraging in certain sectors, particularly in construction and real estate. Apart from the impaired transmission of ECB policy rates to retail rates, charges and commissions of commercial banks are found to be relatively high.
Josef Bonnici: Strengthening economic resilience Address by Professor Josef Bonnici, Governor of the Central Bank of Malta, at the Annual Dinner of the Institute of Financial Services, Saint Julian’s, 20 November 2015. *  *  *  Honourable Minister, members of the Institute, distinguished guests, I would like to thank the President and Committee of ifs Malta for once again organising this Annual Dinner and giving me the opportunity to share my thoughts with such a distinguished audience. Mr President, I am pleased to hear you speak about the Institute’s commitment towards raising the standards of financial services education, as this is exactly what we need for our dynamic financial sector to remain successful and a key contributor to our economic development. Over the years, the Central Bank of Malta has worked closely with the Institute, and more recently participated in the successful ifs Annual Conference on The Future of Pensions. This national conference acted as a catalyst to rekindle the debate on private pensions in Malta. I commend the Institute for this important initiative. I wish you success in all the Institute’s future endeavours. Introduction The current international economic environment poses a number of key challenges, including the weak recovery in the euro area, the slowdown in emerging economies, the enduring geopolitical tensions, and possible spill-overs from the US monetary policy that could affect financial conditions on a global scale. Clearly, our economy is not immune from developments beyond our shores.