Alfred Sant contests EC statement that Malta is affected by large share of non-performing loans

Concern about non-performing bank loans has not featured in Malta’s Country Specific Recommendations in recent years

Maltese MEP Alfred Sant has contested the European Commission’s statement that Malta’s economy is affected by a large share of non-performing loans.

Sant was referred to the EC’s Spring forecast on Malta, which claims “a number of member states also continue to be affected by large shares of non-performing loans. Country specific recommendations are addressed to Bulgaria, Cyprus, Ireland, Italy and Malta in this sense”.

Non-performing loans are loans held with banks on which interest and capital repayment are not being honoured.

“They have been a crucial problem with many major banks across Europe.  Their elimination has been less than successful, which has held up progress in setting up a banking union within the Eurozone,” Sant said.

Non-performing loans have been a vital point of concern in successive versions of the European semester, the process by which the European Commission comments about the economic and financial performance of member states. It then makes recommendations, called Country Specific Recommendations (CSRs), for future policy in each member state.

But Sant said concern about non-performing bank loans in Malta has not featured in Malta’s CSRs in recent years.

Sant filed an urgent parliamentary question asked the EC to explain why it has included this as a concern in this year’s general Communication, when the same point is totally absent in the Country Specific Recommendations addressed to Malta.

Sant said that its economic analysis included in the March 2018 country report, the Commission stated that Malta’s good economic performance has also been reflected in the performance of the banking sector. It laid no stress on any risk related to NPLs in Malta, which stayed at around 3.7% of GDP.

The Maltese MEP noted that according to the European Banking Authority, the average of non-performing loans to GDP held by all European banks stood at 4% of GDP at the end of December 2017, higher than Malta’s.

He therefore asked the European Commission to clarify what it considers to be a “large” share of non-performing loans held by banks in any given country.

Under the procedure of an urgent parliamentary question, the Commission should give priority to the reply requested from it.

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