The Central Bank of Malta has issued its commentary on the release of monetary statistics for November 2012.

Contribution to euro area monetary aggregates and counterparts

The contribution of resident Monetary Financial Institutions (MFIs) to the euro area broad money stock (M3) increased by €21.3 million, or 0.2%, in November, to €10.3 billion. The annual growth rate accelerated to 7.4% in November, from 4.9% one month earlier, partly due to a base effect resulting from a sharp drop in broad money in November 2011.

The month-on-month increase in M3 stemmed entirely from a rise in intermediate money (M2), which went up by €22.0 million, or 0.2%, offsetting a marginal decline in marketable instruments. Overall, intermediate money grew by 7.5% on a year-on-year basis, up from 5.3% one month earlier.

In turn, the rise in M2 was driven by an increase in the narrow money component (M1), which rose by €34.3 million, or 0.6%. This reflected the continuation of monthly flows into overnight deposits, observed during most of 2012. Overnight deposits expanded by €36.7 million, or 0.7%, fuelled by higher balances belonging to households.

During the month, deposits with an agreed maturity of up to two years fell by €19.4 million, or 0.5%. Holdings belonging to resident insurance companies and pension funds declined, offsetting a rise in balances belonging to resident private non-financial corporations (NFCs). Conversely, deposits redeemable at up to three months’ notice – the remaining component of M2 – expanded by €7.1 million, or 4.9%. This resulted from higher balances belonging to resident private NFCs.

Turning to the counterparts of M3, credit to euro area residents expanded by €78.4 million, or 0.5%, as credit granted to general government and to the remaining sectors of the economy rose. The increase of €60.6 million, or 1.7%, in credit to general government stemmed from additional bank holdings of both Maltese and euro area government securities. Meanwhile, credit to other sectors went up by €17.8 million, or 0.1%, reflecting an increase in loans granted to households and private NFCs residing in Malta. Consequently, the annual rate of change in total credit stood at -1.9% in November, up from -2.1% in October.

The external counterpart of M3, which reflects transactions between MFIs residing in Malta and residents of countries outside the euro area, grew by €247.8 million, or 2.6%. This reflected a considerable increase in claims on non-residents which outweighed a somewhat smaller rise in liabilities. The former resulted from higher holdings of securities issued by non-euro area sovereigns, together with higher deposits held with banks outside the euro area. Meanwhile, the rise in liabilities was caused by higher deposits belonging to credit institutions, private NFCs and non-bank financial intermediaries outside the euro area.

The “other counterparts” category, which is negatively related to M3, rose by €304.9 million, or 2.1%, in November, driven by growth in longer-term financial liabilities. In turn, this mainly reflected an increase in MFIs’ shares and other equity during the month. Increases in liabilities to the central government, mainly in the form of demand deposits with the Central Bank of Malta, also contributed substantially. 

Transactions with Maltese residents: deposits and credit

In November, deposits belonging to residents of Malta and held with resident MFIs expanded by €7.8 million, or 0.1%. As a result, the annual growth rate reached 6.9%, from 5.2% one month earlier.

There were significant inflows into more liquid assets during the month. In particular, overnight balances expanded by €28.8 million, or 0.6%, driven by deposits belonging to households and insurance companies and pension funds. Similarly, deposits redeemable at a notice of up to three months put on €7.3 million, or 5.1%, in November. Conversely, deposits with an agreed maturity of up to two years fell by €28.3 million, or 0.8%, reflecting a drop in holdings belonging to various economic sectors.

Credit granted by resident MFIs to residents of Malta rose by €51.7 million, or 0.5%, in November, as credit granted both to general government and other economic sectors of the economy expanded. Nonetheless, since this increase was considerably smaller than that registered in November 2011, the annual rate of credit growth slowed down to 2.1% from 2.7% in October.

Credit to general government rose by €26.5 million, or 1.1%, as a result of higher MFI holdings of Malta Government Stocks (MGS), in part reflecting the acquisition by MFIs of €10.8 million worth of MGS in the primary market during the month. Nonetheless, the annual growth rate of credit to general government slowed down further to 0.8% from 1.5% one month earlier. 

Credit to other residents rose by €25.2 million, or 0.3%, reversing the fall experienced in the previous month. The increase stemmed from additional lending to households, mainly to finance house purchases, and to private NFCs operating in a number of sectors, including the wholesale & retail trade and manufacturing. This masked a drop in loans to the construction sector, among others. The annual growth rate of credit to residents other than general government eased to 2.5%, from 3.0% in October.

Net foreign assets of Maltese MFIs

Net foreign assets held by resident MFIs expanded by €191.8 million, or 1.6%, in November, as a significant rise in foreign claims outpaced an increase in corresponding liabilities. The former resulted from increases in foreign securities held by resident MFIs and in private sector deposits held with non-resident MFIs. Meanwhile, the rise in foreign liabilities stemmed predominantly from growth in deposits belonging to non-residents and held with the resident credit institutions. The resulting annual growth rate of net foreign assets reached 11.3% from 9.0% one month earlier.

Bank lending and deposit rates

In November, the weighted average interest rate paid by resident MFIs on all outstanding deposits belonging to Maltese households and NFCs remained unchanged at 1.42%. Meanwhile, the weighted average interest rate charged by MFIs on outstanding loans to resident households and NFCs rose by two basis points, reaching 4.33%.

The weighted average deposit rate was one basis point higher than in November 2011, while that charged on loans was six basis points lower than a year earlier.

Further economic and monetary information can be obtained from the website of the Central Bank of Malta www.centralbankmalta.org