, 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,

over the medium to long term. but it is too early to tell what these implications might be. there are several key elections taking place in europe next year. they will determine the ability of governments to maintain support for structural reforms as well as for the european project. destabilisation of politics in europe could impact global markets and global growth. the us is expected to stay on a moderate expansion path. the consensus growth forecast for 2016 is 1. 9 %. the economy is more or less at full employment, consumption has rebounded, and household income growth has recovered to near pre - crisis rates. the problem with the us recovery, at least from the perspective of singapore and the region, is not its pace of growth but its composition. us gdp growth is not generating as much trade as previously, with persistent weaknesses in business investment, including in it. this has implications for export growth in asia and in singapore. us consumption generates only around two - thirds the import demand that us investment does. so for asia and singapore, we need to see a recovery in us investment. bis central bankers ’ speeches china ’ s growth should slow but we do not expect a “ hard landing ”. the official target of 6. 5 % is quite attainable on the back of fiscal stimulus and continued credit expansion. in fact, the risk is not of too low a growth rate but a growth rate that is achieved by adding to the underlying vulnerabilities in the chinese economy : high and rising levels of corporate debt, industrial over - capacity and deteriorating asset quality in the banking system. changes in the composition of china ’ s growth will continue to have an impact on asia and singapore. the rebalancing of demand away from investment and towards consumption has weighed on the region ’ s exports of commodities and capital goods. but over time, there are opportunities for countries which re - orientate the structure of their exports to tap on china ’ s burgeoning demand for consumer goods and services. with growth at nearly 10 % p. a. over the past decade, china ’ s imports of consumption goods have expanded twice as fast as intermediate goods. singapore ’ s economic growth remains sluggish. real gdp growth came in at 0. 8 % in the second quarter on a quarter - on - quarter, seasonally adjusted annualised basis. growth in the first half of 2016 has averaged 2. 2 % in year - on - year terms. the economy ’ s performance in the second half of 2016