In an urgent parliamentary question to the European Commission, 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.
This featured in the EC’s Communication on the 2018 European semester, published this week. According to the Commission, “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”.
Loans held with banks on which interest and capital repayments are not being honoured are called non-performing (NPL) and have been a crucial problem with many major banks Europe-wide. Their elimination has been less than successful, which has held up progress in setting up a banking union within the eurozone.
Non-performing loans have been a vital point of concern in successive versions of the European semester. This is a 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.
A general Communication from the Commission to the European Council presents an overall view of what member states are being asked to do in the CSRs. Concern about non-performing bank loans in Malta has not featured in Malta’s CSRs in recent years. Sant’s 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, also for this year.
Furthermore, in its economic analysis included in the March 2018 Country report, the Commission states 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.