Apart from the already mentioned rents issue, there are other apparently minor but certainly unhelpful matters, ranging from the difficulty of finding school places, opening a bank account and the time consuming effort to get an ID card. While home ownership in Malta remains among the highest in the EU, it is also evident that the changing fabric of society and economic factors are pushing some segments of the population to resort to the rental market. The continued rise in house prices reinforces this pattern. According to Eurostat, house prices rose at an annual rate of 5.6% in the first half of this year, following a 5.3% increase last year. The deflated measure has also picked up in the first half of this year. This acceleration suggests that although the issuance of permits for the construction of residential units continues at a brisk pace growth exceeded 30% last year and up to September this year - supply still falls short of the demand for housing. Continued increases in house prices risk rendering house ownership unaffordable for a wider segment of the population in a country accustomed to a very high rate of home ownership. Moreover, while overall risks to financial stability from real estate remain contained at the current juncture, an extension of recent trends may result in potential macro-financial imbalances. Page | 6  Dear colleagues, The year 2018 was a milestone date, marking the Central Bank of Malta’s fiftieth anniversary of its establishment and also the tenth anniversary of Malta joining the Eurosystem.

These links need to be studied more rigorously, both at a micro and macro level, as well as across sectors. In this regard, regulation and supervision must aim at minimising regulatory arbitrage. Irrespective of the set-up, or technology, institutions transmitting common types of risks should be treated on the same footing. It is also opportune to formulate a holistic strategy for our financial services sector that takes into account a national risk appetite. One must take stock of the risk/benefit quotient of each subsector, and the lessons learnt thus far, and put it in a long-term context on where to focus going forward. During the year, at the request of the Maltese Government, Malta underwent an IMF Financial Sector Assessment Programme, which is an in-depth assessment of the financial sector. Furthermore, a comprehensive update of the 2015 National Risk Assessment (NRA) was carried out in 2017 and published earlier this year. It identified potential money laundering and terrorism financing threats and vulnerabilities that present risks to Malta's economic and societal stability. The NRA forms the basis of Malta’s National AML/CFT Strategy. In fact, some of the initiatives identified in the NRA are already being implemented. In addition, a Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEVYAL) has just ended a rigorous on-site mission to assess Malta’s standing with international AML/CFT standards. The local authorities are eagerly expecting the final results of these evaluations as they represent a standardised global yardstick against which to benchmark our state of play.