Editorial | Wednesday, 23 January 2008

A welcome new banking player

The opening up of a first branch of the Portuguese bank Banif in Malta is welcome news especially since the declared aim of the bank is to expand and open up 25 other branches in Malta over a five-year period. This new investment in our country is precise and tangible evidence of the benefits of our becoming members of the European Union, which now also has Malta on its investment radar. Th0e employment of 40 people, with ambitions to increase its workforce over time, is good news also for bank employees, who as a result are faced with job mobility prospects hitherto considered limited. The investment of a small Maltese shareholding is also a wise commercial decision, as it will allow the owners of the bank to be aware of the local peculiarities of doing business in Malta. Last Monday’s official opening was much more than just another opening of a bank: the Portuguese company was making a statement that the group looks positively towards our country and its economic prospects. It symbolises confidence and trust also in our way of operating, and this can only augur well for business.
Our interest in this new investment goes far beyond all these accolades. We are particularly interested in this new venture because it inevitably will throw a spanner in the banking works of the two main banking groups in Malta. As a consequence, this can only increase the sense of competition among the banking sector which, with its bumper profits often placing the bottom line before a reasonably costed service to the consumer, risks becoming the bete noire of the Maltese consumer.
There can be little doubt that the local consumer considers banking charges and costs to be excessive, and most particularly the local consumer looks negatively at the tendency for charges, once increased, to be followed by similar increases on the part of the supposedly competing bank. This smacks of a cartel and the MFSA as the banking regulator should be seen to be more actively on the side of the consumer who is defenceless against such powerful groups.
The recent controversy on costs linked to credit cards being charged to retailing outlets is a case in point. The regulator must take a position, and not simply expect this to go away of its own accord, as happens all too often in this country. Regulators are the novelty and a direct consequence of the European way of doing business. The prime reason for their existence is to ensure that the consumer gets a fair deal and is in no way short-changed by the operator. It is the guardian of the consumer who is defenceless in facing these abuses. People expect protection.
The ailing economy in America is placing the economy, and no longer Iraq, as the prime electoral issue. In clear focus of the government and consumers is the role to be played by the banks. Yesterday, the US Federal Reserve reduced interest rates by three quarters of a percentage point in the hope that the economy will be kickstarted and a recession avoided, or at least limited in its far-reaching consequences. No doubt Europe will follow suit, with the credit crunch already having consequences for the UK. The European Central Bank is most likely also to reduce interest rates and this could be most welcome even locally where the consequences of a flagging American economy will almost certainly affect our tourism and exports. The flipside is that the global economic situation is worsening, with consequences on the spending power of consumers. This will certainly bring about lower growth rates than those envisaged up till recently.
In this background of an ailing world economy, government must take steps to soften the inevitable blow on our economy. Hopefully the reduction of interest rates will be implemented as soon as possible after announced by the European Central Bank. This reduction will come as welcome news to the thousands of people burdened with mortgage payments. It will also serve to give a welcome respite to numerous businesses which will have their costs slightly trimmed which will help to keep them competitive.
The worst fears of an ailing world economic situation are its effects on our tourism industry which has just registered its best year and which is still dependent on the UK market. A weaker pound will almost certainly convert itself into a costlier price to holiday in Malta.
With the UK out of the euro zone this particular market will be vulnerable. Accordingly all must be done to make up for this fall in competitivity with the UK market, and it will be worth seeing what measures the MTA is taking to ensure that a fall in numbers, and even more importantly in spending power, is not registered.
The arrival of the new bank augurs well even under such new precarious economic developments, as it will force the banks to rethink their strategy, to offer competitive packages and to compete for custom.
As already announced, Banif will also present themselves on the Malta stock exchange. Also a most welcome move.