The Bank of Valletta Chairman, Roderick Chalmers, has addressed the regulatory, economic and business sectors in Malta regarding the current global economic crisis.

Mr Chalmers said that this is a critical period for all main economies in the world, as for the first time in over a century, every major economy is in, or facing an imminent recession and there is no large economy that is in a position to inject money into the global market.

“In an era of relatively easy money through sub prime mortgages, lower interest rates and little restrictions from the US and UK regulatory services, Banks borrowed from the short-term market”, said Mr Chalmers. “However, following the problems that arose in the sub-prime sector, Banks suffered substantial losses that drastically reduced their lending power. This outcome of this was that there were no funds available in the short term market.”

Through the adoption of a cautious and responsible approach to lending, the effect on Maltese Banks was moderate, considering that BOV has a 70% loans to deposit ratio whereas an international bank such as Northern Rock, have an average of 170% loan to deposit ratio.

Markets are currently facing extreme pressure from heavy institutional and retail redemption requests and a massive de-leveraging being undertaken by banks and hedge funds. This has led to unprecedented declines in consumer confidence, business activity, property prices, manufacturing activity and exports and shipping. Consumers are re-checking their consumer habits, which in turn is affecting the economy and all business activity.

This sentiment is also being felt locally with tourism levels expected to fall. Malta’s biggest tourism market is in the UK, one of the worst hit countries. However, Malta’s economy is very resilient and can get through these difficult times through investment that will stimulate growth in the economy. This will be possible through careful use of available EU funding.

Mr Chalmers concluded by saying that the credit responsibility of Maltese Banks and BOV has ensured that credit is still available to the Maltese Economy. The key players in the Maltese Economic Sector actively participated in the discussion section that concluded the business meeting.