The GRTU has been arguing for years that the local banks impose exorbitant charges and interest rates. This was confirmed by the governor of the Central Bank himself just two weeks ago, when he emphasised that lending rates in Malta are among the very highest in the eurozone – and so are bank charges.
It was also confirmed by the European Commission, which is regulating what it calls Multilateral Interchange Fees, or fees that are hidden, paid by customers who do not know exactly what they cover and fees which the bank imposes for a service you neither use nor need. These are arguments and actions made by institutions that hold the highest standing.
GRTU has documents in hand, supplied by none other than its own members, that show that interest rates commonly vary between five per cent and seven per cent. The fact that bank interest rates and charges are high is undeniable, and this is why the debate on the subject has geared up. This in not just a national debate; it is a debate that has been going on both in the EU and on a global level, and to which Malta is finally catching up. There is no turning back.
Malta’s banking sector has been praised by the GRTU for not committing the mistakes made by other banks. In any case, however, the Maltese government would have been there to support the local banks should they have found themselves in difficulty, as was the case in other countries. This is much more than any small business could ever aspire to should it be in difficulty.
The crises in the EU financial sector revealed the cruel and catastrophic domino effect that we must, by all means possible, try to avoid in the future. The banking sector – and with it the financial system – stopped working.
As a result, businesses stopped and employment stopped. Difficulties in the financial sector proved to have devastating effects on the country’s social and economic stability, which in turn also affected other countries.
The European Commission’s programme for the banking sector was set up to protect EU citizens, businesses, governments and the financial sector itself. The plan which is already being enacted aims to enhance the fitness of banks and put in place a back-up plan should a crisis occur, which would not involve putting in jeopardy citizens, businesses and governments. This is the stability we should aim for – not safeguarding the banks’ interests at the expense of everyone else’s.
If banks’ lending interest rates and charges are excessive and impinge on the competitiveness of our enterprises and our country, then yes, they need to be regulated
Banks must be paid their fair share and nothing else. The risk they take for providing loans is accurately calculated, with the government having to intervene to put up a guarantee should the banks not find the collateral provided by the business sufficient.
What about the risk the enterprise owner takes when taking out a loan with a bank? A start-up risks not only losing any starting capital he had but also his own house, which is home to his family, if things do not go well and he cannot pay up! The percentage of defaulters in Malta is very low, and banks announce millions of euros in profit on a yearly basis after having taken precautionary measures to cover defaults. So, yes. We can easily say that the risk is very well calculated.
The bottom line is that today Maltese businesses compete not only with Maltese companies but also with foreign companies, and the interest rate of the loans they take out impinges heavily on their competitiveness. How can a Maltese enterprise taking out a loan at six per cent compete with foreign enterprises taking loans at under three per cent?
It is not an issue of government control. If banks’ lending interest rates and charges are excessive and impinge on the competitiveness of our enterprises and our country, then yes, they need to be regulated.
This would be based, of course, on evidence found by competent authorities. We are therefore very pleased that the Malta Competition and Consumer Affaris Authority is taking action. GRTU has already held a meeting with the authority on the subject, and we are informed work is under way.
If this issue is being taken up seriously and has become a matter of public debate, it is only thanks to the GRTU, which has relentlessly continued to represent the interests of its members.
GRTU squarely and solely stands behind the interests of its members which are micro, small and medium enterprises. We stand behind no one else. While GRTU has collaborated with local banks only for the benefit of its members, GRTU is not linked financially to the banks. This is GRTU’s clear and transparent position.
Paul Abela is the president of the Malta Chamber for Small and Medium Enterprises (GRTU).
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