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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