The number of monetary financial institutions (MFIs) in Malta exploded by 65 per cent between 2004, when Malta joined the European Union and the beginning of 2008, while they grew by a further 22 per cent last year alone, according to statistics released by the European Central Bank this week.

The growth rate far exceeds that of any other EU member State, with the closest competitor being fellow EU10 member State Slovakia, whose financial sector membership count grew by a comparative rate of 36 per cent since 2004 and by 12 per cent last year.

On 1 May 2004, the number of MFIs operating in Malta had stood at 17 and the number had grown to 28 by the beginning of 2008. While the number does not appear necessarily extraordinary, considering an EU-wide total of just over 10,000 MFIs, it is large indeed considering Malta’s small population. A number of countries have far fewer MFIs per capita, such as Estonia with 29 MFIs, Bulgaria’s 33, Slovakia’s 38 and Slovenia’s 30 MFIs.

Other figures released by the ECB recently through its Banking Structures Report, which account for the credit institutions up to 2006, show competition within the Maltese banking sector had increased at a healthy rate between 2002 and 2006.

The ECB uses the Herfindahl index to assess the market share of a country’s largest credit institution, which measures the size of firms in relation to the industry and provides an indicator of the amount of competition among them. Decreases in the index generally indicate a loss of pricing power and an increase in competition, whereas increases imply the opposite.

Malta’s rating in the index had fallen by 34 per cent over the four-year period, but the country still remained the EU’s ninth least competitive banking market.

The monetary value of home loans and consumer credit was also shown to have skyrocketed between 2002 and 2006, evidencing that Malta’s banks had been lending like never before during that period.

Home loans in Malta were shown to have surged over the four-year period and grew by over 97 per cent after escalating from home purchase lending levels of e898 million in 2002 to e1.775 billion in 2006.

Consumer credit lending has also exploded by over 138 per cent over the time frame, having grown from e106 million in 2002 to e252 million in 2006. “Other” household lending, which excludes home loans but would include loans for items such as furnishing or renovations, similarly leapt from e240 million to e524 million.

In the meantime, loans issued to businesses nearly doubled over the period – from e7.423 billion in 2002 to e14.102 billion in 2006 – while bank deposits of non-credit institutions also grew, albeit at a slower rate, from e8.675 billion to e11.059 billion over the four years under analysis.

Assets under management in Malta by investment funds saw the largest growth of any criteria assessed by the report, having seen an enormous four-year growth of no less than 640 per cent – from e642 million in 2002 to e4.753 billion in 2006.

Total assets held by banks in Malta nearly doubled over the four years and amounted to e30.556 billion in 2006 as against the e16.313 billion held in 2002.

Assets under management by insurance corporations, meanwhile, also saw impressive growth of 123 per cent over the four years and have leaped to a total of e1.151 billion in assets under management in 2006.

With the exception of Estonia, which had 14 credit institutions in its banking market in 2006, Malta, with 18, had the lowest gross number of banks active in its market in 2006. But with one credit institution per 22,534 residents in 2006 Malta had the fifth highest concentration of banks per capita in the EU.

Maltese banks also provided one automated teller machine (ATM) per 2,651 residents and one branch per 3,687 residents. Both figures fall below the respective EU25 averages of 1,355 and 2,183 per inhabitant and Malta counted 110 bank branches on its shores in 2006.

Workers employed by credit institutions in Malta, however, grew only slightly over the time frame. The number of bank employees had stood at 3,459 in 2002 and had grown to 3,515 in 2006.