People are right to be angry
MFSA should not handle and investigate consumer complaints anymore. We need a Financial Services Ombudsman to protect consumers.
The handful of persons who run Bank of Valletta should have the humility to put their clients and their bank before their own egos and take the necessary steps to clear up the mess they have created with the La Valette Multi Manager Property Fund.
They should ease the deep pain they have caused to many people. Before they retire or move on to other jobs they must work hard to restore the reputation and performance of the bank.
In the last six years the top management of Bank of Valletta set out to build the success of their bank at the expense of their employees and their clients. Employees were set tough targets and given incentives to sell their products to as many people as possible. Risky products like the La Valette Multi Manager Property Fund were not assessed by the appropriate structures within the bank. The various checks and balances that were meant to be in place to prevent what happened from happening, did not function properly as the structures became incestuous with the same people sitting in different posts and shutting out people who could have stopped the whole thing from happening.
As a result we have pensioners and hard working people who have lost hard earned money. Terminal benefits of former dockyard workers and savings built painstakingly by individuals over a working lifetime have been practically wiped out after the Bank of Valletta persuaded them to invest in funds that were not managed properly and from which vulnerable clients should have been protected.
I know of pensioners who can barely read and write who were made to sign a declaration that they understood the Prospectus of the fund and that they were experienced investors. These pensioners are now being bullied into accepting the meager compensation of 0.75 cents per share. When the fund started collapsing, well connected individuals within the bank withdrew their investment and got between 1.07 and 1.14 euro per share.
It is so sad that in Malta we do not have someone of the moral calibre of Mervyn King, the governor of the Bank of England, who in the last few months has spoken out against banks that exploit “gullible or unsuspecting customers” for short-term profits. Occupying such a top position in Britain’s banking system has not kept him from showing solidarity with the vulnerable people who have been hurt by the unethical and greedy practices of the banks. In Malta, persons who should know better and whose duty is to protect citizens, have tried to prop up the powerful individuals who have caused the pain.
Mervyn King accused the banks of finding it acceptable to routinely rip off clients. Even the economic secretary to the treasury Justine Greenberg had to admit that King’s criticisms of banking were likely to strike a chord with the public: “People will recognize a lot of his comments about regulating the banking industry and in terms of how the banks deal with customers.” King said that the people have the right to be angry with the banks that cheated them out of their money. He said that banks do not care deeply about their customers and have increasingly “taken bets with other people’s money.”
Last Tuesday the Financial Services Authority (FSA) in Britain warned banks and wealth managers to improve the way they advise vulnerable investors after a regulatory survey found that 80 per cent of clients were sold unsuitable products. Many of these products were riskier than the client’s situation asked for. FSA also recommended that customers who suffered harm or were disadvantaged by unsuitable advice should be adequately compensated. FSA is going ahead with new regulation to prevent customer detriment.
Unfortunately the same level of consumer protection does not exist in Malta. The thousands of citizens who have lost their money because of unscrupulous financial advisors and unethical bank practices have lost their trust in the Malta Financial Services Authority (MFSA) because of its ineptitude at doing something really effective about cowboy practices in this area. The MFSA has adequate powers to protect consumers but fails to use them consistently and robustly.
We need some real changes in this area. MFSA should not handle and investigate consumer complaints anymore. We need a Financial Services Ombudsman to protect consumers. A special unit outside MFSA should also be assigned the duty to investigate white collar crime. MFSA should focus on regulating the financial services sector instead of also involving itself in promoting the industry. There should be a code of ethics for MFSA top officials to stop them from hob-nobbing with the persons they are meant to regulate.
And as politicians, if we want to gain the trust and respect of our citizens, we should speak up and defend vulnerable people whenever they are being abused and not let ourselves be co-opted in a network of powerful individuals who do all they can to keep themselves from being held accountable for their actions.