Malta’s three largest banks, Bank of Valletta, HSBC and CommBank Europe Ltd, will be placed under the direct scrutiny of the European Central Bank from 2014 under a deal struck in Brussels yesterday.
After months of talks on the need to create a new European banking supervisory mechanism – aimed at avoiding a similar financial crisis to the one that hit the bloc’s economy a few years ago – EU leaders yesterday rubber-stamped an agreement reached earlier by EU finance ministers.
It was an 11th hour deal. Last October, EU leaders had committed themselves to striking a final agreement on the mechanics of the supervisory structure by the end of this year.
Following the first day of an EU summit in Brussels yesterday, the agreement was described by Prime Minister Lawrence Gonzi as very positive for Malta as the island had managed to win two important concessions.
The first was about which of the island’s 25 registered banks would fall within the new structure.
According to the original proposal, all banks with assets amounting to more than 20 per cent of a country’s GDP (€1.5 billion in Malta’s case) were to be included within the ECB’s remit.
This would have meant the majority of Maltese banks joining the new mechanism.
However, following a proposal by Malta’s Finance Minister Tonio Fenech, the EU accepted that only those banks with total assets of more than €5 billion would come under direct scrutiny so long as at least three banks from each member state were included.
Malta’s BOV and HSBC have assets surpassing the €5 billion threshold.
The third largest bank on Malta’s list, CommBank Europe Ltd, is a subsidiary of the Australian Commonwealth bank.
Asked whether it would have been more beneficial for Malta to have all its banks on the EU’s radar, to ensure better control, Minister Fenech said the EU did not have the resources to control every single small bank within its borders so this would not have been possible.
“The real problems start from the big banks and I agree with the EU’s approach,” he told The Times.
The second compromise that will be to Malta’sbenefit involves the voting system that is be adopted in the decision-making process of the new mechanism, which is to be administrated by the European Banking Authority within the ECB.
Malta and other small member states managed to force the others to accept a one-vote-per-member-state system independently of the countries’ size.
This will allow Malta to wield the same weight as it has now in making decisions.
Originally, the proposal was for a voting system based on qualified majority which would have substantially diluted Malta’s influence. This idea was later taken off the negotiating table.
The summit, which will come to an end today, is also discussing further economic and monetary integration.
Malta is arguing that the EU needs to first implement all the proposals already agreed before embarking on further reforms.