The European Central Bank yesterday gave the thumbs up to Malta's banks after having performed quite satisfactorily in reaching benchmarks. In fact, the Maltese Banks were quite well positioned when it came to overall performance.

The three banks involved were BOV as Maltese bank and HSBC and Deutsche Bank as subsidiary companies. The stress tests were introduced as a preventive measure to monitor banking performances across the EU in the wake of the financial crisis which resulted in multi-billion bailouts for Greece, Portugal, Spain, Ireland and Cyprus.

As their economies and balance of payments spiralled out of control, so did banking debts and banks needed an emergency influx of cash. This happened in both 2010 and 2011 as banks that had been given a pass later needed bailouts all the same. The rest is history. Malta's banks have always been regarded as stable and good diligent performers.

Long before the stress tests became mandatory, everyone was already convinced that the local banks were in a good position. After all, that is one of the reasons why we got through the financial crisis relatively unscathed. 

The ECB checked the worth of banks' holdings and subjected the banks to a stress test that simulates how their finances would fare in an economic downturn.

 A total of 25 banks were flagged by the ECB in its exercise. 12 of those had already put remedial action into place but 13 banks need to come up with measures to bolster their coffers.

While this has been the toughest test on record as yet, it is still worrying that 13 banks across Europe had not made the grade. It shows that the hangover of nursing bad investments is still lingering. The countries where the failures took place speaks volumes; Greece, Cyprus, Ireland and Portugal were all subject to bailouts. But there were some others which are from other nations which are often rapped on the state of finances; Italy and France. The other two are from Slovenia and Austria. Europe, it seems, is still on the road to recovery. But what does it mean on a local level? Malta's banks would be in a fit state to lend money if the economy took a downturn. It continues to reinforce the point that we are a debt and credit economy, but it also means that if there was a crash, there would be enough money to go round to pump back into the system in terms of investment and renewal.

For your average Joe? It all boils down to mortgages. If the banks are still able to offer mortgages in lean periods, then the property market (ergo construction industry) would continue to generate business. And this is one where the government has a feather in its cap. Bankers are in agreement that the government scheme for first time buyers was instrumental in the uptick in the property market, something which has allowed the economy to tick on and continue to grow.