Maltese banks do not appear to need fresh capital injections in terms of an EU deal being forged in Brussels as part of a 'comprehensive package' to stop the euro crisis.
EU leaders including Prime Minister Lawrence Gonzi are holding closed-door marathon meetings in another effort to save Greece from total collapse, undermining the euro. They are discussing a capital injection to banks which have made substantial lending to Greece.
Sources close to the talks told timesofmalta.com that Maltese banks are not expected to bein need of any recapitalisation.
Unlike many major banks in the EU, particularly in France and Germany, Maltese banks have very limited exposure to Greek debt and they are already in a comfortable position to cover any possible losses.
Bank of Valletta is the most exposed bank in Malta but only to the tune of some €9 million.
"Maltese banks do not appear to need any recapitalisation as a result of a Greek partial or total default," the sources said.
"However, it will be another story if other countries are involved in the euro crisis such as Italy or Spain. Until a few years ago, sovereign debt was considered to be a safe investment, a triple-A, and Maltese banks had to invest their money somewhere," the sources said.
"So it is important to wait until the end of the talks to see what the EU comes up with and what will be considered as risky."
Among the proposals on the EU leaders' table is the recapitalisation of major European banks to the tune of some €110 billion and a write-off of some 60 per cent of the €350 billion in Greek debts held by many European banks. This will naturally require fresh public and private funds, which in itself will impact the debts of member states.
Discussions are also focusing on whether the current €440 billion rescue fund, known as the EFSF, should be used as part of this recapitalisation of the banking sector and whether it is big enough for other possible rescues of risky countries such as Italy and Spain.
The biggest stumbling block towards a final agreement is disagreement between Germany and France, the biggest eurozone economies over the EFSF.
Sources close to the EU summit suggested that a final agreement is not expected today as Chancellor Merkel and President Sarkozy are still "miles apart."
Due to disagreements, the President of the European Council Herman Van Rompuy has already called another, possibly final, summit for eurozone leaders next Wednesday.