‘Not on bank’s brief, but business loans must stay conservative’

Employers’ representative David Curmi has denied suggestions that a statement by the Chamber of Commerce which he presides, over high bank interest rates for credit, stemmed in part from his interests with Bank of Valletta.

Curmi is chief executive officer of MSV Life plc, an insurance firm jointly-owned by Middlesea Insurance and Bank of Valletta.

Earlier this week, the Chamber claimed that the lower level of lending to businesses was not down to the popular complaint over high interest rates, but that the decline in commercial credit was due to a “reduced appetite” for investment in certain affected sectors, such as manufacturing and import and distribution – companies that form part of the Chamber.

Elsewhere, small business groups have echoed sentiments by the Central Bank governor Josef Bonnici that Maltese banks have interest rates higher than their eurozone counterparts and must make them more accessible to businesses. The irrefutable evidence was reflected in statements by European Commission experts claiming that banks might be colluding on interest rates, and the fact that the Maltese competition authority (MCCAA) is conducting a sectoral inquiry to establish the effect of interest rates and high banking charges on businesses. It is important for businesses to sign up with the correct bank account for the right benefits and financial opportunities. Read more about different business bank accounts and which is best suited for the specific circumstances of the business.

“Members of the Chamber would undoubtedly welcome lower rates of interest on their borrowings but not at the expense of any threat to the stability of the local banking sector,” Curmi told MaltaToday. “We are well aware of the fact that the strength of our banking sector largely contributed to Malta surviving the effects of the worst financial crisis in the last one hundred years.”

Curmi has defended the Chamber’s ‘responsible’ stance, saying only a conservative approach to lending can ensure the uninterrupted flow of finance for businesses and SMEs.

Maltese banks are currently under pressure to have adequate levels of cash and deposits, and to ensure that they loan out money to businesses that actually succeed: the forthcoming European banking regulator will want Maltese banks to see that loans they extend to industries such as construction, actually reflect the value of the collateral.

But Curmi categorically denied that his role as a Middlesea executive had any bearing on the Chamber’s stance. “Whenever I make a statement or express views on behalf of the Chamber I am always conveying the views of the Chamber and never my own. The issue of bank lending rates has been discussed at the board of management and council of the Chamber and I have also dealt with this matter in my address to members at the AGM of the Chamber.”

Curmi in fact insists that the public debate on bank interest rates – now supported by Labour MP Silvio Schembri, who chairs the parliamentary economic and financial affairs committee – was characterised by “an element of misinformation and reliance on simplistic arguments, leading to incorrect and dangerous conclusions. One of these being that lending rates in Malta are high.”

“The truth is that there is no standard interest rate which is applicable to all businesses on their borrowing. The better capitalised and the more financially-sound companies are, the better they are able to negotiate lower rates.”

Curmi is also adamant that Maltese banks stick to their conservative and prudent lending, while a high liquidity, base.

In fact, he warns that when the banks will be regulated by a single European banking authority, they will also come under the regulation of a ‘one-size-fits-all’ policy. Under pressure from EU regulations means banks risk becoming more restrictive on commercial lending. “It could limit access to finance for the business community rather than making access to finance easier. This would result in the unavailability of much needed financing for businesses,” Curmi said.

“No-one stands to gain from such a scenario, including the investor, the bank and society at large particularly as the country would lose out to potentially viable and profitable projects. It would also lead to a further loss of investment which would, in turn, affect future employment and growth prospects in the country.”

Curmi said the Chamber was supporting a traditional, conservative approach to risk, saying this was beneficial also to SMEs. “If banks over-expose themselves to risk, there is every possibility that they could suffer very undesirable consequences. If that happens, SMEs and the business community would face severe access to finance restrictions, which would pose a much larger difficulty to the continuation of their business than the interest rates currently pose.”