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21 November 2023
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GRTU strongly welcomes the conclusions of the investigation carried out by the Malta Financial Services Authority and the Malta Competition and Consumer Affairs Authority into local bank lending practices to businesses.
This is a fight GRTU has led on its own for many years. It is only just recently that GRTU’s concerns were echoed by the European Commission and the
Governor of the Central Bank of Malta and now the undeniably damning confirmation by the MFSA and the MCCAA through their report.
GRTU has always maintained that commercial banks, as the only vehicles offering access to finance in Malta, had an obligation to enable local businesses to grow and compete. On the contrary however the banks have for years been acting inconsiderately securing excessive profits in total disregard of the pressure they were putting on local businesses particularly SMEs. This is besides the prevailing trend for local banks to lend on “safe” products like home loans and personal credit in lieu of financing for local businesses.
Not only have they been acting greedily and taking policy makers for a ride with their talk of how fragile the banks are and how they are doing their utmost, but they have had the nerve time and time again to point their finger at businesses themselves as being the reason access to finance is so expensive in Malta, because of the level of risk they expose the banks when lending to them.
In businesses there is always risk but the bank is the only player in the equation that is invariably more than adequately covered for the worst case scenario. God forbid something goes wrong in your business and you found yourself at the mercy of the banks. Maltese banks are so risk averse that they do not even pursue balance sheet lending but demand excessive levels of liquid and illiquid security far in excess of their lending.
Indeed, as GRTU has been saying all along, bank-lending policies are detrimental to Maltese businesses and their loan interest rates are amongst the highest in the EU. The reports not only confirm that the interest cuts by the European Central Bank, aimed at encouraging lending to businesses to grow and generate jobs, have only been partially passed on to businesses, but, adding insult to injury, the banks also took their time to lower their rates and did so after being placed under pressure.
The MFSA report also delves into the issue of bank charges. Bank charges are grossly excessive and one of the major sources of income of banks, estimated at around 40% of total revenue. The Regulator rightly points out that there is no plausible reason to justify the level and even the existence of certain charges, mentioning in particular the charges imposed on retail outlets for using debit and credit cards on their EPOS machines. GRTU has been relentlessly arguing against this percentage charge that is so truly not based on actual transaction cost that it can be negotiated.
GRTU will not stop in its struggle to instigate access to finance to become affordable. The current reality is that the authorities have finally woken up after a long sleep and banks are still making excessive profits at the expense of the economy. Such an important report concluded in July has already wasted three months lying on the shelf waiting for Budget day. When will the authorities wake up to the urgency of the situation?
Each and every day that passes, businesses are paying for costs that they could instead reinvest in their business and engage more employees.
They are paying for costs that their counterparts in other EU countries are not. It is pertinent to note that Maltese businesses have been paying loans at an interest rate of 5-6% on average. How can they compete with businesses in countries in which interest rates on commercial finance can be as low as 2%?
For years, banks have been making exorbitant profits. GRTU does not expect local banks not to be profitable, however it condemns restrictive practices towards commercial lending and any potentially abusive practices should be subjected to the competence of local authorities like any other business would.
The reports have concluded that profitability indicators for the core domestic banks in Malta were persistently higher than the EU average.
The time has now come to create a level playing field with our European counterparts.
The Authorities have always showed their reluctance and fear to confront banks and the conclusion of the MCCAA and MFSA reports are an important first step. The Regulators are however not there to simply investigate and make recommendations, they are there to implement their findings and take the necessary measures. Our Regulators need to show their muscle not only in relation to small businesses and SMEs but also in relation to the big fish.
GRTU will continue monitoring the situation closely and will not sojourn in its efforts and representation of the interests of SMEs both locally and at EU level as it will deem fit until immediate revisions and the appropriate remedial action is taken.
The Malta Chamber of SMEs represents over 7,000 members from over 90 different sectors which in their majority are either small or medium sized companies, and such issues like the one we're experiencing right now, it's important to be united. Malta Chamber of SMEs offers a number of different services tailored to its members' individual requirements' and necessities. These range from general services offered to all members to more individual & bespoke services catered for specific requirements.
A membership with Malta Chamber of SMEs will guarantee that you are constantly updated and informed with different opportunities which will directly benefit your business and help you grow. It also entails you to a number of services which in their majority are free of charge and offered exclusively to its members (in their majority all free of charge).