In 2008 the Central Bank of Malta is celebrating its 40th anniversary while the European System of Central Banks (ESCB) and the European Central Bank (ECB) are commemorating their 10th anniversary. Furthermore the euro and the Eurosystem will be ten years old on 1 January 2009.

The Central Bank of Malta 1968-2008

The establishment of a central bank in Malta was first recommended in January 1964 by a UN mission headed by Professor Wolfgang F. Stolper on the grounds that there were serious gaps in Malta's financial infrastructure, particularly concerning advice to the Government on financial and monetary matters.

In response to this recommendation, the Maltese Government obtained technical advice from the Bank of England and the International Monetary Fund. In February 1967 a senior official of the Bank of England, Dr Philip L. Hogg, arrived in Malta to carry out the necessary organisational and legislative work. Legislation was enacted on 11 November 1967 and five months later, on 17 April 1968, the Central Bank of Malta was formally established. Dr Hogg became the first Governor of the Bank.

The operational history of the Central Bank of Malta until 2008 can be subdivided into three main periods (listed hereunder) which reflect the Bank's evolution over the years from an organization carrying out central banking functions in the context of Malta's fixed exchange rate regime to an institution which is now part of the Eurosystem, which sets and implements monetary policy in the fifteen countries of the euro area.

1968 - 1994

Following its establishment in 1968 the Central Bank of Malta focused mainly on the implementation of exchange rate policy, the management of the country's reserves, the supervision of the banking system, the issue of currency and the provision of banking services to the government, public sector bodies and banks.

1994 - 2002

This period was marked by a notable change in the Bank's policy orientation as part of an overall modernization of the financial services sector as reflected in the introduction of new legislation and an extensive revision to the existent laws. The Bank was granted greater autonomy for the formulation and implementation of monetary policy. A Monetary Policy Council was set up and the Bank launched its first open market operations with a view to shifting from a system of direct monetary controls and administered interest rates to a more market-oriented intervention and market-driven interest rates.

2002 - 2007

Malta's preparations for European Union (EU) membership meant that the Bank had to adapt itself to a new environment in line with the country's new commitments. The Bank was granted full independence to formulate and implement monetary policy. When Malta joined the EU the Bank became part of the ESCB. The Governor of the Bank began to sit on the General Council of the ECB and experts from the Bank became members of ESCB committees.

On 1 January 2008 Malta joined the euro area and the euro substituted the lira as Malta's national currency. The Central Bank of Malta joined the Eurosystem and was integrated within the decision making bodies of the ECB. The Governor became a member of the Governing Council of the ECB and experts from the Bank started to participate in Eurosystem committees. The Central Bank of Malta Act was brought in line with Eurosystem requirements.

The ESCB and the ECB 1998-2008

The history of the ESCB and of the ECB is closely linked with the evolution of Economic and Monetary Union (EMU) in Europe.

On the basis of the Delors report the European Council, in 1989, decided that the first phase of EMU, which consisted of the dismantling of all internal barriers to the free movement of persons, goods, services and capital within Europe should start on 1 July 1990. At the same time negotiations began on the Treaty on the European Union, or the Maastricht Treaty, which was signed in 1992 and entered into force on 1 November 1993.

In January 1994 the second phase of EMU began with the creation of the European Monetary Institute (EMI). This phase covered the technical preparations for the introduction of the single currency, the control of excessive deficits and the achievement of convergence in the economic and monetary policies of participating Member States.

Following agreements on the Stability and Growth Pact and on a new exchange rate mechanism (ERM II), the Council of the European Union, in May 1998, decided that 11 EU Member States (Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland) had met the convergence criteria to enable them to participate in the third and final stage of EMU and adopt the euro as their national currency.

In June 1998 the EMI was liquidated and the ECB was set up in Frankfurt am Main, Germany, under the presidency of Willem F Duisenberg. At the same time the ESCB, which comprises the ECB and the national central banks (NCBs) of all EU Member States, also began to function. The third stage of EMU commenced on 1 January 1999 with the introduction of the euro as the single currency in its virtual form. The concept of the Eurosystem was also introduced concurrently with the introduction of the euro. The Eurosystem is made up of the ECB and the NCBs of euro area Member States.

Greece joined the euro area in 2001 and, a year later, the euro banknotes and coins were put in circulation, making the single currency a reality to the European public. In 2003 Jean-Claude Trichet was appointed as President of the ECB. The euro area continued to expand with the inclusion of Slovenia in 2007 and Cyprus and Malta in 2008, bringing the total number of participating countries to 15.

Throughout their ten years of existence the ESCB and the Eurosystem had a major role in ensuring that Europe and, especially the euro area, benefited from stability in prices and interest rates, sustained GDP growth and low unemployment. They were also instrumental in safeguarding the integrity of the financial system and facilitating payment services in a world which has become more integrated. The euro has firmly established itself as a major currency.

Anniversary events

The ESCB is commemorating its 10th anniversary through various activities organized by the ECB in collaboration with the various NCBs. Among other activities the ECB has organized a series of Cultural Days in Frankfurt, covering a range of events involving artists from the various EU countries. The Central Bank of Malta has contributed to these Cultural Days in various ways, including the lending of paintings from its collection for an exhibition at the ECB's premises and the co-financing with other NCBs of a concert. Staff members from the Bank have also participated in sports events which have been organized for ESCB employees.

Open Day

To mark the anniversaries, the Central Bank of Malta, in line with other EU NCBs, is holding an Open Day on Sunday 1 June 2008 from 09:00 to 12:30 at its main building in Pjazza Kastilja, Valletta. The public will have the opportunity to visit the Bank's currency exhibition and the Bank's Boardroom where various memorabilia are being displayed. Various information materials will also be distributed. A panel exhibition covering the history of the Bank as well as the history of EMU is also on display in the foyer.