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IT, Interest Rates and the Island’s Greylisting among
Malta’s challenges for 2022 According to Sparkasse Bank Malta plc Managing Director Paul Mifsud, one of the challenges for the local banking industry in 2022 will remain the strain on earnings due to the prevailing negative interest rates in Euro.
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he ramifications of the ceasing of economic activity and commerce due to Covid-19 lockdowns and other measures continue to be felt. Commenting on the impact this has had on the local banking sector Paul Mifsud, Managing Director of Sparkasse Bank Malta plc, explained that as the lockdowns in Malta had become all the more prevalent, businesses started to seize up as a result, and liquidity and earnings became a concern. “A slowdown in economic activity is a matter of concern for banks especially those that have large credit exposure to the local economy. As a result, several local banks were obliged to adjust their credit strategies for both existing as well as new credit applications and increase their provisions for non-performing loans,” Mr Mifsud said. In Malta there are a number of local retail banks that are directly exposed to the local economy and other banks (referred to as noncore domestic banks) that have less exposure locally and therefore may not necessarily be exposed to the same typology of risk. Sparkasse, for instance, is one such bank where its exposure to credit in general is insignificant. The Bank, being a custodian and
“A slowdown in economic activity is a matter of concern for Banks especially those banks that have large credit exposure to the local economy.”
depositary bank for funds licensed in Malta, chooses to hold its assets in cash with the Central Bank of Malta and part in High Quality Liquid Assets and away from traditional lending. “This offers the Bank’s professional investor customers the comfort of dealing with a bank that is highly liquid with little exposure to business or real estate credit risk. This strategy paid off under Covid-19 as the risk of holding a defaulting or non-performing loan was not inherent in the Bank’s book,” Mr Mifsud stated. In Mr Mifsud’s opinion, the primary challenges for the local banking industry over the next year remain the same as in previous years and can be summed up in three: negative interest rates, IT scalability and further due diligence stress points as a result of the island’s grey listing. “As for the Bank’s plans for 2022, our ambition is to continue to deliver a personalised and efficient service to our customers and continue to provide career progression and opportunities for our work force,” Mr Mifsud concluded. n
