Resident deposits down by €123.4 million, or 1.5%
Credit to the general government rises by €42.5 million, or 1.8%, reflecting higher banks’ holdings of Maltese government bonds.
The contribution of resident Monetary Financial Institutions (MFIs) to the euro area broad money stock (M3) fell by €82.4 million, or 0.8%, in November, to €10.1 billion as the annual growth rate decreased to 7.7% from 8.2% in October.
The monthly drop was to a large extent driven by the narrow money component (M1) and by deposits with agreed maturity up to two years. The former fell by €118.8 million, or 2.2%, driven by changes in overnight deposits. On the other hand, currency in circulation rose marginally. As a result, the annual growth rate of M1 fell to 7.2% in November from 9.6% in October.
Deposits with agreed maturity up to two years, which together with M1 form part of intermediate money (M2), also fell, losing €60.1 million during the month. The drop in this category of deposits and in M1 more than offset a small increase in the remaining component of M2, deposits redeemable at notice up to three months. As a result, intermediate money declined by €175.4 million, and its annual growth rate fell from 4.4% in October to 2.9% in November.
Repurchase agreements, which are excluded from M2 but included in M3, increased by €123 million in November. The increase in these instruments arose as resident MFIs continued to use this instrument to raise short-term funds from other euro area residents. The rise in repos was counterbalanced by a drop in M2 and in debt securities with an initial maturity of up to two years, for an overall decline of 0.8% in M3.
Turning to the counterparts of M3, credit to euro area residents expanded by €49.2 million, or 0.3%, in November. This was propelled by higher volume of credit to residents outside general government, which rose by €165.6 million. On the other hand, credit to the general government decreased by €116.4 million. The year-on-year growth rate of credit fell to 11.2% from 11.5% in October.
On the contrary, the external counterpart of M3, or resident MFIs' net foreign assets in respect of countries outside the euro area, fell by €559.6 million, or 6.7%, reflecting a strong increase in liabilities relative to assets.
The increase in liabilities was mainly attributable to an increase in resident banks' borrowings from non-euro area banks, including repurchase agreements. The accumulation of assets this month mainly reflected increased holdings of securities issued by governments outside the euro area, although the volume of loans to non-euro area residents and deposits held outside the euro area also increased substantially.
At the same time, resident MFIs reduced their other liabilities. These fell by €428 million, or 3.0%, in November, mainly on account of a decline in other liabilities (net), which mainly reflect interbank transactions with other euro area residents.
Transactions with Maltese residents: deposits and credit
Deposits belonging to residents of Malta that form part of M3 and are held with resident MFIs decreased by €123.4 million, or 1.5%. This fall was propelled by a lower volume of overnight deposits, which fell by €128.7 million, or 2.8%. In contrast, deposits redeemable at notice up to three months rose by €3.8 million, while those with an agreed maturity of up to two years went up by €1.7 million.
The annual growth rate of total deposits eased to 1.6% from 3.3%, in October. The corresponding growth rate of deposits held by residents of the euro area with euro area MFIs in November stood at 1.8%.
November's fall in overnight deposits was broad-based across sectors, but was primarily spurred by a decline in balances held by households, insurance companies and public non-financial companies (NFCs). The rise in deposits redeemable at notice of up to three months was fuelled by higher balances held by private NFCs, while the increase in deposits with an agreed maturity of up to two years was driven by private NFCs and other financial intermediaries.
Credit issued by resident MFIs to residents of Malta (including government) rose by €108.5 million, or 1.0%, in November, with its annual growth rate rising to 6.2% from 5.3% in October.
Credit to the general government also rose by €42.5 million, or 1.8%, reflecting higher banks' holdings of Maltese government bonds.
Credit to residents outside the general government expanded by €66 million, or 0.8%, spurred by higher loans extended to private NFCs and the household sector. The annual growth rate of credit to sectors outside general government remained stable at 4.9%, while that of loans rose marginally to 4.7%. By comparison, the growth rate of loans made by all euro area MFIs to residents of the euro area excluding general government was 1.7%.
Net foreign assets of Maltese MFIs
Net foreign assets held by resident MFIs fell by €59.3 million, or 0.5%, in November, as an expansion in their foreign liabilities outweighed a concurrent rise in external assets. In annual terms, net foreign assets contracted by 0.5%, after expanding by 2.2%, in October.
Bank lending and deposit rates
In November, the weighted average interest rate paid on deposits included in M3 rose to 1.13% from 1.11% in October. The interest rate charged on loans fell to 4.71% from 4.74% in October. Compared with a year earlier, the deposit rate fell by four basis points, while that charged on loans fell by two basis points.