Bank of Valletta (BOV) has said it notes that following a meeting of the Governing Council held earlier today, the European Central Bank announced a further cut of 50 basis points (bps) in its reference rate from 2% to 1.5%. Accordingly, since October 2008, the ECB has implemented cumulative cuts in its reference rate of 275 bps from 4.25% to 1.5%.

BOV said it has to date reduced rates on both its deposits and its loans/advances to reflect much of the cumulative cuts in the ECB rates referred to above. However, on this occasion, and for the time being, BOV said it is not proposing to make further reductions to either deposit or loans/advances rates. The Bank said it is entirely satisfied that interest rates being charged by BOV on loans and advances in Malta are already very competitive by European standards, with, for example, home loans currently being made available from as low as 3.15%.

BOV went on to say that all banks have both sides of their balance sheets to manage, and a further reduction in loans/advances rates would necessitate a corresponding reduction in the rates of interest paid on deposits. Deposit rates have fallen sharply over the past few months, and BOV said it believes that it is appropriate that it should hold the rate of interest paid to its many depositors at the current rates at this time.

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