Government committed to enhancing credit regulation regime - Gonzi

Gonzi was speaking during a conference held by the Malta Association of Credit Management that also celebrated its 10^th anniversary. The conference focused on achievements in the sector, and the challenges that lie ahead.

During his closing address, he said that being a politician in today’s reality, “given the ongoing economic developments in neighbouring countries, and developments on Libya and Egypt, one becomes aware of the importance of credit risk management taken within the context of a national perspective.”

Pointing out that the conference is being held against a unique economic background, Gonzi said that the country is facing “great challenges.”

“I challenge anyone who has experience in the sector to find a previous time which can compare to current developments in terms of what we are having to analyse and decide upon with regards to financial and economic risk,” he said.

He said the recent “unprecedented financial crisis, and the consequential economic recession, where due to the financial sensations having deviated from well-established principles in risk and credit risk assessment.”

“There was a let-down by names that we believed would be there forever. It would be a big mistake to assume that it is a closed chapter in our recent financial history,” he warned.

He said that the end of 2010 and the beginning of 2011 have showed “high levels of volatility – but this time it dealt with large fiscal imbalances in certain member states.”  He added that the resulting sovereign debt crisis “exposed the high price of what happens when governments procrastinate and drag their feet on hard political decisions that nevertheless need to happen.”

Gonzi stressed that “well-functioning credit is a precondition for trade and enterprise in any economy. Yet for credit to provide the oil and grease that allow the wheels of economy to turn, it has to be part of a sustainable and responsible credit system.”

“In times of economy recovery, the well functioning of credit is crucial for any country,” he said, stressing that “government is committed to enhancing this regulatory regime in Malta.”

He said it is Malta’s regulatory regime “that has saved us from the financial collapse, and it is this same regulatory regime that has contributed towards making Malta a very attractive financial investment sector.”

“Anyone who is serious and means real business wants a strong regularity regime,” he said, adding that in the past “some justified reduced regulation under the guise of reducing bureaucracy, so as to be able to market themselves as attractive locations for investment that.”

He said that “this is fine, as long as it means that not everyone can do as they like with the end result that, when trouble brews, it proves impossible to withdraw from a situation that could have a ‘tsunami’ effect on a whole range of institutions.”

He also stressed that “regulation by itself is however not enough” and called on creditors and financial operators need to be guided by a “sense of value and ethics in doing what is right even when doing business and dealing with financial institutions.”

He augured that the MACM will continue with its endeavours to enhance the function of credit in Malta, and welcomed the association’s efforts to enhance the country’s credit risk assessment regulation system.