productivity and stability for sustainable growth address by dr mario vella governor, central bank of malta delivered during the ifs annual dinner 18 november 2016 dear president and members of the committee of institute of financial services ( ifs ) malta, personally and on behalf of the board of directors of the central bank of malta and of its senior management, i thank you for the opportunity to address this distinguished audience. dear minister. ladies and gentlemen. this annual event brings together key stakeholders in this country ’ s economic development and growth, and in the development of the social, educational and cultural conditions without which economic development and growth are not possible. it is now an established tradition that the governor of the central bank seizes the opportunity of the annual dinner of ifs malta to make a number of factually grounded remarks about some matters in the remit of the central bank. the traditional presence of the minister of finance at this event is of vital importance because it provides the stakeholders present with a more dynamic view of the whole, in the light of the statutorily distinct roles of the ministry of finance and the central bank. before sharing some thoughts with you, i would like to commend ifs for its ongoing commitment to responding to the changing needs of the marketplace and its pursuit of excellence in the provision of financial services education. it is encouraging to hear that the institute has had a successful year and that you are working on new initiatives to promote even higher professional standards. this is most welcome, as education and professional development are fundamental to the sustainability of our financial sector and its continued success. your strategic partnerships with the university of malta and overseas professional bodies such as the european banking & financial services training association ( ebtn ), the london institute of banking and finance, and the global association of risk professionals page 1 of 8 ( garp ) - whose representatives are with us tonight - reflects the institute ’ s excellent reputation. that a committee member of ifs - malta has been elected to the highest decision making body of a european association for a third consecutive term confirms the institute ’ s integrity and professionalism. the central bank has always worked closely with ifs and will continue to support its activities. this year, we also cooperated with the ifs during the european money week to promote financial literacy to underprivileged youths and participated in the successful ifs malta annual seminar on pension reform. i look forward to even more cooperation in the future. mr president, well done and thank you for taking a

, to amend banking rule 9 which involves measures addressing credit risks arising from the assessment of the quality of asset portfolios of credit institutions. in a nutshell, the proposal aims to establish a concrete plan with those banks with npls higher than 6 % to reduce such npls below that level over a period of 5 years, where failure to adhere to this plan will require the institution to shore up its resilience through the accumulation of an additional capital reserve. meanwhile, on a european level, the european authorities are pushing for the establishment of a european deposit insurance scheme ( edis ), which is a necessary ingredient to complete the architecture of the banking union project. this is because a common deposit insurance fund inspires the same level of confidence to depositors throughout the entire banking union, creating a consistent and common framework for supervision, resolution and depositor protection. moreover, this joint safety net within the banking union is expected to prevent the creation of competitive distortions, thus facilitating cross - border banking and hence strengthen financial integration. however, in this regard, there is still some way to go for agreement among all member states, as risk reduction measures, particularly through asset quality reviews of the less significant institutions and addressing the banking - sovereign debt loop, need to be also implemented. malta is committed to taking the edis file forward during its presidency. risks : going forward, we expect economic growth to moderate, while remaining robust and well above the euro area average. we consider that risks around this scenario are balanced. on the upside, there is the potential for private consumption to grow even more rapidly in a low interest rate environment especially if labour productivity increases to permit higher wage settlements. the downside risks relate mostly to the external situation. malta is one of the most open economies in europe, heavily dependent on international trade for its long - term prosperity. slower than expected growth in key trading partners, geopolitical tensions in our immediate neighbourhood and a resurgence of protectionism threaten this prosperity. another dimension of risk relates to inflation. i have already explained that the bank believes that malta ’ s potential economic growth rate has risen in recent years, implying that the economy can grow more rapidly than it used to without fuelling inflation. nevertheless, output currently exceeds potential. page 5 of 8 should such a situation persist, we would normally expect to see upward pressures on prices and costs. we have not observed them yet, as wage growth has remained largely contained and foreign inflation is subdued. the labour market situation, however,