The exposure domestic banks have to Greek sovereign debt is limited to around €10 million as financial institutions have decreased their holdings in stressed eurozone countries, according to the Central Bank of Malta.
The figures were published yesterday by the Central Bank in an update of the Financial Stability Report originally released in June.
“The risks associated with the sovereign debt crisis appear to be generally contained since the total exposure of the banks in Malta to the three countries benefiting from an EU-IMF bailout, Greece, Ireland and Portugal is limited,” the Central Bank said.
Greek sovereign debt represents some 2.6 per cent of Tier 1 capital held by the exposed banks while sovereign exposures to Ireland and Portugal are even lower at 1.8 per cent and 0.9 per cent.
According to the European Banking Authority, Tier 1 capital is the amount of funds held by a bank for general solvency purposes.
Sovereign exposures to other EU countries such as Italy, Spain, Cyprus and Belgium also remained low, representing collectively 3.4 per cent of Tier 1 capital, the Central Bank said.
Italy, Spain and Cyprus have been downgraded by rating agencies while Belgium risks being downgraded after bailing out the Franco-Belgian bank Dexia.
Exposures to French and German sovereign debt, which enjoy Triple A credit rating, represent 13.7 per cent and 15 per cent of Tier 1 capital of the exposed banks.
In the June publication, exposures to the stressed countries were higher, however the data also included inter-bank loans.
In the latest publication the Central Bank said there was an improvement in the non-performing loan ratio attributed to households while the ratio of corporate non-performing loans deteriorated marginally.
Despite the challenging economic and financial conditions abroad, the Central Bank said, the domestic financial system remained resilient.
“No new risks appear to have emerged and the risk of a rapid increase in interest rates... has attenuated, with official interest rates likely to remain stable in the short-term,” the report said.
But credit risk remained “elevated” because some sectors of the economy, such as construction, lagged behind, despite the sustained pace of overall economic activity, the Central Bank said.
The banks featured in the original report and the updated one are APS, Banif, Bank of Valletta, Bawag, HSBC, Lombard and Volksbank.