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Mediterranean Bank reclassified as core bank

The Central Bank of Malta has reclassified Mediterranean Bank as a core bank following a reassessment of banks of systemic relevance.

The methodology defining these categories was published by the CBM in the 2011 edition of the Financial Stability Report (FSR). It coves five broad criteria reflecting size, substitutability and connectivity. On the basis of this methodology, three categories were identified: core domestic banks; non-core domestic banks; and international banks.

The Central Bank of Malta decided to repeat the exercise every two years to ensure that each bank’s standing in its relevant category shall remain valid. The exercise was run for the 2013 edition of the FSR, in which FCM Bank was re-classified from international bank to non-core domestic bank.

In January 2015, the Central Bank of Malta repeated the exercise using end-2014 data. This revealed that Mediterranean Bank has further increased its domestic relevance, mainly through targeting resident deposits, higher holdings of domestic securities, and through the takeover of Volksbank Malta, rebranded as Mediterranean Corporate Bank, in 2014.

“As a result of this latest development, this group has further increased its presence locally through higher lending to residents. In this regard, the Central Bank of Malta’s Financial Stability Committee agreed that this banking group, at sub-consolidated level, will be considered as a core domestic bank as from the next Financial Stability Report Update 2015, which will cover developments in the financial system during the first half of 2015,” CBM said.

Results also showed that Credit Europe Malta Branch, which was previously classified as a non-core domestic bank, should now be reclassified as an international bank. This change was underpinned by the declining trend in its resident deposits over the past years, resulting in negligible links with the domestic economy.

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