and lending rates. the bank responded by widening the margin above the discount rate from three percentage points to ten, thus effectively freeing lending rates. the lifting of restrictions on both domestic lending and deposit rates simultaneously ensured adequate profit margins for the banks. in 1999 all restrictions on deposit rates were abolished, while in 2002 domestic lending was completely liberalised. with financial markets in an early stage of development, exchange control liberalisation had to proceed cautiously. it was felt that domestic markets should be allowed to grow, and financial asset prices to adjust, before being exposed to free cross - border movements of capital. a sequencing policy was adopted aimed at easing controls on longer - term capital flows while continuing to restrict shortterm flows. exchange control liberalisation began in earnest in the mid - nineties when malta accepted the article viii obligations of the imf ’ s articles of agreement and the process was completed immediately prior to malta ’ s accession to the european union on may 1st this year. the deregulation measures i have described were accompanied by institutional restructuring, which ensured that throughout the reform process the financial system was not subject to shocks. the new 1994 banking act and the related directives brought malta ’ s legislation in line with eu standards governing bank solvency, capital adequacy and large exposures. at the same time, the malta financial services centre was established as the regulator for financial services other than banking, which remained the responsibility of the central bank of malta. at this time, the central bank undertook a number of initiatives to develop a properly functioning money market, focusing mainly on the three - month treasury bill. an interbank market also began to operate and the bank began to trade actively in the money market through regular auctions of term deposits and repos. the central bank also ceased to extend credit to the government, thus further underlining its independence. to reduce its influence further, the government privatised a small bank in 1994 and one of the larger banks the following year. in 1999 it sold its majority shareholding in the other major bank to a global banking institution, hsbc. the arrival of this bank spurred competition and helped to promote better practices. in addition, operating licences were granted to several foreign - owned banks, including, i should add, austrian banking institutions, whose presence here is most welcome. thus, from a highly regulated system dominated by the public sector, the maltese banking system was transformed into a modern market - based system, geared to meet the financial needs of a growing

bank of japan have always enjoyed the timely, candid, and fruitful exchange of information and views, notwithstanding the geographical distance between the two countries. dr. dombret, who is with us today, is the executive director for international relations. tonight, i want to mention another of his many important roles, as “ head of the money museum. ” the deutsche bundesbank refurbished its money museum last december. unfortunately, i have not yet had the chance to visit the museum myself, but according to our staff at our representative office in frankfurt, the new museum offers a number of innovative displays that captivate visitors. they have told me that the displays show the bundesbank ’ s deep - rooted belief that “ geld ist vertrauenssache, ” or “ money is a matter of trust, ” in other words, its strong commitment to price stability. the environment surrounding central banks is forever changing. nevertheless, one thing i am sure will never change is that our two banks will continue to work closely together to fulfil our 1 / 2 bis central bankers'speeches common mission of achieving price stability. i would like to close my remarks with the heartfelt wish for continued friendship and cooperation between the deutsche bundesbank and the bank of japan, as well as between germany and japan. thank you for your kind attention. 2 / 2 bis central bankers'speeches