In many ways, banking is like most other businesses. Banks aim to give the best returns to their shareholders even if their primary obligation is to safeguard the interests of their depositors.

In other ways, banking is different as it is heavily regulated, almost to the degree that applies to the airline and medicine industries.

As the new administration gets down to work, one of the electoral pledges that Prime Minister Robert Abela will want to seek to implement is to make it easier for businesses to bank in Malta. This might well include giving businesses the ‘right’ to hold a bank account.

Not everyone has welcomed this proposal. The CEO of Bank of Valletta, Rick Hunkin, took exception to the prime minister’s somewhat patronising comments on the issue, arguing: “Some accounts are too risky for us.”

So who is right?

Some misconceptions and oversimplifications need to be cleared up before one can define banking rights and obligations. No bank will turn down customers in an unjustified and discriminatory way. On the other hand, being heavily regulated, banks face heavy financial sanctions and reputational risk if regulators and supervisors find their onboarding of customers fails good-practice criteria. These criteria are well defined by banking regulators like the European Banking Authority (EBA) and banking supervisors like the European Central Bank (ECB).

It is also a major misconception that local banks are more conservative than any other European banks in how they take on customers and monitor their account transactions. Astonishingly, the Malta Financial Services Authority (MFSA) did not speak out to clear the air when the prime minister expressed his concern about the difficulties that some businesses face to open a bank account.

One can argue that the conditions imposed by regulators for banks to pass the test of effective vigilance against money laundering practices, are too strict. The one-size-fits-all approach in the due diligence processes adopted by banks needs to be re-engineered to make it more risk-based. For instance, a small business trying to offer a service to the community must not be subjected to the strict due diligence process that is required for operators in the gaming sector, which is acknowledged to be an industry often abused by money launderers.

So, yes, everyone has a right to apply to hold a bank account. But, similarly, every bank has a right to follow the regulator’s instructions to ensure that bank accounts are not used to launder money.

It is fallacious to argue that banks in Malta enjoy quasi-monopolistic conditions. No bank is prepared to take its anti-money laundering obligations lightly. This attitude is motivated by the fact that banks do not want to risk losing their correspondent banking relations. International banks have shown they are not convinced of the robustness of some Maltese banks’ adherence to anti-money laundering standards.

The government is still the BOV’s largest shareholder. This does not give any politician the right to pontificate on what banks should do. Unfortunately, this has been done too often in the past and it has not helped this bank’s reputation.

The MFSA is a joint supervisor, with the ECB, of the leading local banks. The Central Bank of Malta has direct involvement in the EBA, which sets banking standards and regulations.

Rather than keep a low profile in a public debate on banking rights and obligations that is becoming too politicised, the MFSA and the CBM should make the case to their European counterparts that the due diligence process for onboarding clients should become more risk-based.