New York Times made wrong estimate of Malta’s ‘Brexit exposure’

The New York Times was said to have made an error in compiling the exposure of Maltese home loans to the effect of Britain’s exit from the EU, the Central Bank of Malta said in a statement.

The New York Times article of 7 February 2019 – Where Europe Would Be Hurt Most by a No-Deal Brexit – featured a chart with the title ‘Share of lending by banks located in Britain’ and a legend that read “Households and businesses in Malta rely on British-based banks for almost 40% of foreign lending”.

While the source the journalists used was data from the Bank of International Settlements’ Consolidated Banking Statistics (CBS), the positions reported in the BIS CBS however do not refer to banks located in Britain – but to banks headquartered in Britain.

“The BIS CBS positions referred to by the journalists include not only the cross-border claims of UK banks on residents in Malta, but also claims of subsidiaries and branches in Malta of banks headquartered in the UK. The 40% share reported in the New York Times article is totally misleading as it incorporates lending to households and businesses by locally-incorporated subsidiaries of UK banking groups, which lending cannot be considered as foreign lending,” the Central Bank of Malta said.

Indeed, the Central Bank’s estimates show that the share of borrowing needs from households and non-financial corporates sourced from the UK is only around 5% of total foreign borrowing as opposed to the 40% reported in the article.

“Furthermore, according to Malta’s Financial Accounts Statistics (from Whom-to-Whom Accounts), the share of total non-consolidated borrowing of households and businesses sourced from the rest of the world stood at just 12.9% in 2016. In fact, the Central Bank does not expect disruptions in the operations of domestic subsidiaries of UK parent banking institutions from Brexit.”

The Central Bank said that the New York Times article significantly overstated the impact of Brexit on the financial sector in Malta, even in the event of a No-Deal Brexit.