The Central Bank of Malta  this morning launched a Forum for Financial Stability  to foster a structured dialogue on issues of common interest, with a particular emphasis on the identification and management of risks that could have a negative impact on the financial system.

The launch was made at a seminar which was addressed by  the Governor of the Central Bank of Malta Michael C Bonello, the Chairman of the Malta Financial Services Authority (MFSA), Joseph V Bannister, the Secretary General of the Malta Bankers Association, James Bonello, and John Fell, Deputy Director General, Financial Stability Division, European Central Bank .

The Governor in his address warned that the fact that Malta's financial system was not directly affected by the recent turmoil abroad should not give rise to complacency. He said the Central Bank of Malta and the Malta Financial Services Authority were acutely aware of the need to preserve confidence in the financial system, not least because Malta today has a reputation to defend as a successful financial center. He hoped that the Forum would prove to be of mutual benefit to the authorities and the stakeholders, becoming a source of up-to-date market intelligence and promoting an increased awareness about the importance of continued efforts to mitigate risks and to strengthen the resilience of Malta's financial system.

Mr Bonello said that there was a relatively high concentration of risk on both sides of bank balance sheets, in particular a significant exposure to the real estate sector, both in the form of loans and collateral held against them. At a time when corporate non-performing loans were increasing, he reiterated his call for the banks to increase their provisions commensurately with this heightened credit risk. At the same time, dividend policies must be mindful of the need for higher levels of retained earnings in order to further strengthen capital buffers, also in view of the more onerous requirements of the Basle III regulatory regime, which will be largely transposed into the Capital Requirements Directive (IV).