currency was becoming increasingly vulnerable. that is why i was an advocate of eu membership and of early euro adoption. we only need to look at the example of iceland, which stayed out of the eu, and the financial disaster it is now experiencing. look at denmark – an advanced stable country which is also pegged to the euro. because of this turmoil, the danish central bank has had to increase interest rates. this is the price of going it alone in times of stress. how much maltese lira remains in circulation? there is still a considerable amount of maltese currency which has not been presented for redemption. there is about lm11 million ( €25. 6 million ) in coins and something like lm28 million ( €65. 2 million ) in notes. holders of coins have two years to present them at the central bank of malta and in the case of notes it is 10 years. money is still coming in, but at a very slow pace. do you think this lm39 million will ever be returned? the experience of other countries suggests there is always a considerable proportion of currency issued which is never returned. it depends on how long the currency has been in circulation. many coins which were issued up to 30 years ago have probably left the country through tourism or have been lost. it is the same with notes, especially the small denomination notes – they might have been lost or deteriorated. some of the higher denomination notes might still be hidden away, and maybe forgotten. has the euro hoarding started? i do not suppose all those who had that habit have adopted a new way of doing things. in 2007 there was considerable activity with people exchanging maltese lira notes for euro on the kerb market – and that probably represented mainly hoarded money. we had people who were hoarding money because of habit – these were persuaded to open bank accounts. last year we saw a sharp increase in bank deposits when the banks targeted these people with very attractive interest rates on short - term deposits to take them over the end of the year to save them the trouble of having to exchange cash. what we know is that we have not reached the same level of currency issued that we had before. there is a caveat here as the currency is shared with 14 other countries. do you believe that the international financial crisis is prompting more people to become reluctant about depositing their money into banks? there is no evidence. across the eurosystem, in september, after the lehman brothers collapse there was an

michael c bonello : interview with the sunday times ( of malta ) interview with mr michael c bonello, governor of the central bank of malta, by the sunday times ( of malta ), published on 17 november 2008. * * * if i had spoken to you at the beginning of the year, would you have envisaged this financial mess worldwide? i do not think anybody, anywhere, could have fully anticipated the devastating consequences of the sub - prime mortgage crisis in the us. we are learning a sobering lesson about the downsides of liberalisation and globalisation. for almost a decade the world economy had experienced rapid growth. now we are seeing the other face of globalisation. this is a systemic crisis and it will therefore take longer to resolve than other recent crises. the challenge for policymakers is both complex and unprecedented. it is, however, somewhat reassuring that it is being tackled in a determined and coordinated manner at both political and technical levels. when do you think we'll be out of this dark tunnel? i do not think anybody is in a position to answer to that. it is still unfolding. do you think there was a belated political response to the financial crisis? were the warning signs ignored? this problem did not happen overnight. it was precipitated by the lehman brothers failure, but we had preliminary signs in august 2007, which culminated in the northern rock ( uk bank ) failure. the ecb and other central banks started injecting liquidity into the markets then. the gravity of the situation only became fully apparent a year later. the government is insisting the local banks are under no threat from the international financial crisis because of their conservative lending. do you concur with this point of view? maltese banks are not directly threatened by the financial crisis. our banks do not hold asset - backed securities associated with the sub - prime crisis. and as the international monetary fund confirmed last summer, they are well capitalised and have high liquidity ratios. maltese banks do not generally borrow from the international money markets to fund lending operations but rely on customers'deposits. it is significant that at the end of september, deposits by maltese residents amounted to €8. 6 billion, which is equivalent to one - and - a - half times malta's gdp. that was an increase of €239 million since the end of 2007. our banks, moreover, have very prudent lending policies. they have diversified portfolios and appropriate risk management