Nearly one in every 10 loans is not being repaid on time, according to the Central Bank.

Its financial stability report, published yesterday, gives an overall positive review of domestic banks, although it shows an increase in non-performing loans.

The loans, including those not repaid on time or fully honoured by clients, reached 9.2 per cent of the total by the end of last year.

The report covers developments in the Maltese financial system, identifying potential risks and vulnerabilities and evaluating its resilience.

The loan portfolio, which remained the main asset component for the banking sector, rose marginally. This, the report notes, saw lending to households increase.

Customer deposits remained the main funding source for the core domestic banks, rising by nearly six per cent and reaching 85 per cent of total liabilities.

During 2013, the core domestic banks’ capital buffers continued to improve. Liquidity remained ample, with a ratio significantly above the statutory 30 per cent minimum.

The core domestic banks’ profits declined by 8.6 per cent in the period under review, generally owing to lower income from net interest. However, profitability ratios still compared well with previous years and were significantly better than those of EU counterparts.

The results of the top-down stress tests undertaken by the Central Bank reaffirmed the banks’ overall underlying strength to various hypothetical shocks.

Risks arising from the non-core domestic and international banks remained generally low and stable too.

The report includes a summary of the main vulnerabilities and risks faced by the local financial sector.

During the year, risks from the local economy eased, driven by the positive growth trends reported in 2013 and early 2014. Risks from the EU sovereign debt crisis also abated.

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