Maltese banks have been praised by credit rating agency Fitch, the European Commission and the International Monetary Fund, Finance Minister Edward Scicluna said yesterday as he introduced the Banking (Amendment) Bill.

Fitch had noted that the three banks subjected to comprehensive tests – HSBC, BOV and Deutsche Bank – had passed the tests without any problems.

There were no problems with regard to the banks’ capital and the required adjustments were minimal.

The Commission had praised the two principal Maltese banks for reaching thresholds and passing stress tests in a sustainable manner. They were profitable and kept adequate capital.

While local institutions had seen a reduction in their profits, this was used to increase their capital, also making good for the banks’ non-performing loans, Prof. Scicluna said.

The solvency and liquidity of banks was higher than what was required. Their performance was solid

The IMF described the Maltese financial system as remaining resilient.

The solvency and liquidity of banks was higher than what was required. The banks’ performance was solid.

It also noted that supervision of banks had been strengthened in various sectors.

Prof. Scicluna said the aim of the Bill was to strengthen the resilience of the European financial sector to be able to absorb shocks.

Bank of Valletta, which was praised along with HSBC. Photo: Darrin Zammit Lupi

It would transpose an EU directive on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.

This dealt with certain vulnerabilities shown by the institutions.

The Bill also addressed the crucial issue of insufficient levels of capital and established prudent requisites by imposing sufficient reserves.

The minister said the new framework would make banks stronger.

It would also increase their capacity to manage risks related to their activities and absorb any eventual losses. The Bill would require changes in the role of the Board of Directors as there would be more emphasis on external directors. It would ensure that the board was operating without any conflicts of interests.

Credit institutions would have to establish procedures enabling employees to report any internal violations.

They would also have to consider a contingency plan for situations of significant financial deterioration.

Criminal and administrative fines were revised to serve as deterrents. In the past, foreign credit institutions acted in ways that adversely impacted economies, he said.