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Comparison of the banks of Malta and Cyprus

Many of our clients are often asking about the banking system in Malta and if it is similar to the one in Cyprus. To answer this question I would like to give more detail about the differences between the Maltese and the Cypriote banking system. Even though both countries are small islands in the Mediterranean they are very different in how they handle their finances.

Cyprus was very successful until the financial crisis in 2008. The country managed to quickly lower their debt and the national debt dropped from 70.9% of the gross domestic product of 2005 to 48.9% just three years later. The island managed to achieve this partly with lower tax rates and illicit money from other countries. Cyprus and Greece have strong economic ties and Cyprus is one of the principal creditors in Greece. One third of the capital resources of Cyprus where in Greece in 2011. When Greece started suffering more and more under the crisis it affected Cyprus negatively as well, and eventually the banks were suffering under a financial crisis. The system collapsed in 2012 and Cyprus lost billions. At this point the government applied for financial aid from the EU. When the ECB stress test was conducted recently it was clear that the banks and Cyprus were still in a very bad state, and they do not have enough capital resources to survive another crisis.

The banking system in Malta is fundamentally different. The banks have their capital mostly from national sources, and not other countries. This is mainly the reason why Malta did not suffer a lot under the crisis. The banks are generally much more conservative and more reluctant conducting risky business practices. This is certainly good news, because if you would like to relocate your company to Malta and open a Maltese business account you can be certain to find a stable banking system. The largest banks are currently HSBC Malta, Banif and the Mediterranean bank. They performed well in the ECB stress test, which means that the banks have enough capital resources in case another financial crisis hits the market. Of course we hope that this will not happen!

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