Such an approach is key in ensuring that no single tool is overburdened. Reawakening growth, reigniting productivity and restoring inclusiveness Before I conclude, let me suggest how we can successfully navigate this global landscape with contradictory forces held in tension. I have no precise answer. But I will highlight three important outcomes that need to be achieved jointly in order to secure continued and sustainable progress in the global economy. First, is the need to reawaken growth. Having had sub-par growth for nearly a decade now, policy-makers need to relook what we have learnt and rethink our approaches; from fiscal to monetary policies and structural issues that need to be addressed, to enable us to remove any impediments to growth. We need to enact policies that enable the private-sector to revive their dynamism and explore new strategies to enable them to engage and uncover productive investment opportunities. The second is to reignite productivity. To this end, just as how technology and globalisation has resulted in many of the paradoxes outlined earlier, it is also an avenue that could provide answers to our challenges. Policy-makers and the private sector need to automate and adopt technology to increase productivity and dispense the easy way out of depending on low cost labour model for competitiveness. Third, and perhaps the most important of all – to restore inclusiveness.
However when the acquisition of high yielding assets is funded from short term sources, the financial institution is not only exposed to losses on the asset side but also to adverse changes in funding costs. In such a situation, the Central Bank finds itself in a position where it is more exposed to losses on collateral. Whereas the Central Bank will be constantly prepared to provide the necessary liquidity to the banking system to perform its intermediation role, the Central Bank expects that credit institutions will be looking primarily to the market for their funding requirements. Among the many lessons that may be drawn from the experience of the international financial turmoil, one that stands out is the importance for each banking institution to keep a prudent mix of dependable sources of funding, to limit the level of financial leverage and to maintain a sound balance sheet. The merits of traditional banking practices are echoed in the recent remark by the German Finance Minister. He said, “I believe it is in the interest of the financial sector itself that it should concentrate more on its proper role of financing the real economy, and ensuring that  6  BIS central bankers’ speeches  capital is allocated in the most intelligent way, instead of banks conducting the bulk of their trading on their own account”. Such considerations provide the foundations for drawing the desired roadmap for the future evolution and growth of Malta’s domestic banking sector and the preservation of financial stability.