Where, as in Malta, the performance of the financial sector hinges crucially on the fate of a small number of players and where the lack of depth and liquidity in capital markets often causes the market value of a particular debt instrument to deviate from underlying fundamentals, the risk of contagion within the system, as well as, from other systems is accentuated.3 This latter aspect might become less relevant as financial services providers in Malta and in the EU respond to the introduction of the Financial Services Action Plan and the eventual establishment of a single market in financial services. On the positive side, such initiatives provide better income-earning and liquidity management opportunities, improve the efficiency with which the sector operates and enhance its capacity to weather sector-specific shocks. On the other hand, the advent of liberalisation and heightened levels of competition could well spur service providers domiciled in Malta to take on new risks and venture into non-traditional lines of business. Furthermore, as a result of passporting rights, competition is likely to become more acute. The ensuing interdependence between different sectors and countries could well expose the domestic system to new vulnerabilities, including possible contagion from systemic shocks. This will be especially the case upon Malta’s entry in the euro area as such a move would provide further momentum to the pace of financial market integration. Moreover, the eventual linkage of the domestic payment system with TARGET will also facilitate the transmission of certain risks, not least those of an operational nature.

Therefore, financial literacy can be seen as a key element for a wellfunctioning economic system and thus as a prerequisite for sustainable economic growth and financial wellbeing of individuals. The establishment of the Ad-Hoc Committee to prepare the National Strategy for Financial Literacy in Cyprus Recognising the seriousness of the issue, state authorities around the globe have taken actions in order to enhance financial literacy among the wider population. A typical response to the challenge, is the establishment of a National Strategy for financial literacy in which a number of public and private stakeholders are involved. Up until recently, no such organised effort had been initiated in the case of Cyprus. Even though a number of initiatives have been undertaken by various stakeholders, these significant and valuable efforts have been limited in scope and without the necessary coordination for a truly effective impact on society as a whole. To this end, following an invitation by the Parliamentary Committee of Education and Culture, an Ad-Hoc Committee for the formulation of a National Strategy for the Promotion of Financial Literacy and Financial Education in Cyprus was established in December 2020. The Committee consists of members from the Central Bank of Cyprus (CBC), which also has the coordinating role, the Ministry of Finance, the Ministry of Education, the  1/4  BIS - Central bankers' speeches  Cyprus Securities and Exchange Commission, Dr Panayiotis Andreou (Cyprus University of Technology) and Dr Andreas Milidonis (University of Cyprus). The Committee receives administrative and analytical support from the CBC.