A Communication from the College of Commissioners of the
European Union confirmed that it has approved the setting up of
Malta's Development Bank and found it to be in line with EU
state aid rules.
In welcoming the decision as a "fundamental step in
extending Malta's financial structure", Deputy Prime
Minister, Mr Louis Grech said that "the country will now have
a financial institution that specialises in development and which
will not be guided solely by the profits of the
The Deputy Prime Minister explained that the principal aim of
the Bank will be to promote socio-economic development through
non-commercial activities to finance different sectors, the main
ones being Small and Medium Enterprises and Infrastructural
Projects, without distorting competition unduly.
Mr Grech added that "the Government is expecting the Bank
to have a prominent role in stimulating investment and growth,
making access to finance easier and, wherever possible, on easier
terms. It will fill a long-felt void."
The Malta Development Bank will act in the main as a second-tier
financial institution crowding-in established credit institutions.
This means that it will primarily operate when the private
commercial banks fail to make appropriate financing available or,
if it is available, it is not offered at normal market terms.
The approval of the Bank by the Commission's
Directorate-General Competition came about after months of
prolonged negotiations between it and the Office of the Deputy
Prime Minister, which was assisted by a Working Group under the
chairmanship of Mr Rene Saliba.
The negotiations were also complemented by various technical
studies commissioned by the Government with a view to establishing
the magnitude of market failure as well as to draw up a Business
Plan for the Bank. This was also complemented by a series of
consultations that were held with various stakeholders and also
together with the Opposition.
The scope of the Bank is twin-pronged. On the one hand, it
will finance commercial enterprises, particularly small and medium
sized ones, which have sound and plans for new
businesses or wish to expand existing ones. On the other
hand, it will also be involved in financing medium and large
The Bank will have an authorised capital of €200m, allowing
it to leverage this to around €1bn of loans in due
course. However, the initial paid-up capital is expected to
be around €30m, with further capital pay-ups depending on the
growth of the Bank's business. The Bank will be owned 100
percent by the Government. It will have a guarantee from the
Maltese Government on both the assets and liabilities side, the
extent of which will be negotiated between the Bank and the
Ministry of Finance.
The Commission's Decision lays down the agreed parameters
for the Bank's operations, including its compliance with
various rules relating to State Aid and General Block Exemption
Regulation. It also specifies the financing envelopes
approved for the Bank for the first three years of operation,
following which these will be reviewed in the light of
The Bank will be considered as a non-profit making institution,
but its Statute lays down that it will follow prudent banking
practice and only finance projects that are commercially
viable. It will initially operate mainly through guarantee
schemes provided to the private commercial banks, who will continue
to inter-relate directly with their clients and carry out due
diligence and project sustainability studies.
The Bank will be an unregulated financial institution, but its
operations will be monitored by a strong Supervisory Board.
The Bank will not take retail deposits, but its capital can be
augmented by loans from other financial institutions. In due
course, it may be authorised to issue bonds to the public.
The Union's Eurostat had already informally advised that the
Bank will not be considered as part of the Government's
finances, and therefore will be excluded from the deficit
Mr Grech said that "the setting up of the Bank is another
Electoral Manifesto proposal we are implementing. It will
enhance the country's financing structure and contribute to
economic growth, and we now join the other European Countries that
have a national development bank," said Mr Grech.
He added that, subsequent to the First Reading of the Act, he
would be presenting the Second Reading of the MDB Act some time
after Parliament's summer recess.
(Source: PRESS RELEASE ISSUED BY THE MINISTRY FOR EUROPEAN
AFFAIRS AND IMPLEMENTATION OF THE ELECTORAL MANIFESTO)
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