The IMF Country Reports Series covers economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with officials of the country, is published at the option of the member.
International Monetary Fund. Monetary and Capital Markets Department
INTERNATIONAL MONETARY FUND
The financial sector in Malta is large compared to the economy and is strongly connected with the rest of the world. While Malta has benefited from considerable financial inflows, the associated risks, especially related to money laundering and terrorism financing (ML/TF), need to be closely monitored and addressed.
Key metrics suggest that the banking system is in good health, but challenges exist. Banks are well capitalized, liquidity is ample, and profitability is healthy. However, core domestic banks' high exposure to property-related loans, together with the rapid house price appreciation, poses a risk. The significant share of nonresident deposits in international and noncore domestic banks makes them vulnerable, but their exposure to the domestic economy is limited. While nonperforming loans (NPL) remain below the euro area (EA) average, there are pockets of distressed corporate loans that continue to impact banks' balance sheets.