News | Wednesday, 13 May 2009

ECB lowers rates, local banks protect deposits

Charlot Zahra

During the last ECB Governors’ meeting in Frankfurt on Thursday, Central Bank Governors from the euro zone cut the main interest rate by another 0.25 per cent to a record 1.0 per cent.
Until we went to print late yesterday night, only two of five Maltese banks tagged to the ECB rates replied to our questions as to whether they were going to reduce their interest rates following the latest ECB adjustment.
The five banks in question are HSBC Bank Malta plc, Bank of Valletta plc, APS Bank Malta plc, Lombard Bank Malta plc and Banif Bank (Malta).
Kenneth B. Micallef, Head of BOV’s CEO’s Office, told Business Today that the bank still retained “the same position as communicated through our press release of 5 March 2009”, that is, of not cutting interest rates further.
“Meanwhile, the Bank is keeping the matter under constant review taking into consideration both sides of the balance sheet, which includes deposits and lending,” he told the paper.
Asked by Business Today whether Lombard Bank Malta was going to reduce its base rate and the amount by which it was going to reduce it, the bank gave a telegraphic reply.
“Lombard Bank treats each case on its own merits,” Anthony Bezzina, Lombard Bank Malta’s Chief Officer Credit said.
On her part, Isabelle Nolf, from the Operations Department of Izola Bank, told Business Today that the bank had “no plans to reduce the bank’s base rate for the time being.
“We will keep our customers informed with any developments or adjustments we might make in the near future,” she added.
The bank’s current base rate was 1.5 per cent and it was last revised on the 11 March 2009.
This decision brought the total reduction in the interest rate on the main refinancing operations of the Euro area since October last year to 325 basis points.
Two months ago, on the same day that the ECB had announced its decision to cut the ECB rates by 0.5 per cent on 5 March 2009, BOV was the first to announce that it was going to hold its base rate untouched at 3.15 per cent for home loans.
When contacted yesterday evening, a BOV customer service official quoted the bank’s official base rate at 2.45 per cent for normal lending and 2.15 per cent for home loans, a reduction of 0.5 per cent on both rates since March.
Four days later, HSBC Bank Malta said that it was leaving the bank’s base rate for lending at 2.50 per cent and for home loans at 2.2 per cent.
However, economist Lino Spiteri had revealed that the bank had increased its risk premium rate by 1 per cent, which is the rate paid on top of the base rate which is gauged on the risk level that a loan offers to the bank issuing it.
When contacted yesterday evening, an official from the HSBC call centre quoted the bank’s base rate at 2.75 per cent, an increase of 0.25 per cent over the rate quoted till now.
On 12 March 2009, Banif Bank had reduced its base rate by 30 basis points on home loans from 2.5 per cent to 2.2 per cent, while leaving untouched its base rate for its other business at 2.5 per cent.
The next day APS Bank announced that it would be leaving its base rate unchanged at 2.35 per cent. An APS customer service official contacted yesterday evening confirmed that the bank’s base rate had not changed since then.
As reported in last week’s edition of Business Today, during a meeting of the ECB Governors’ meeting, the main policy interest rate was cut by a further 0.25 per cent, reducing interest rates in the euro area to a record 1 per cent.
The interest rate on the marginal lending facility was also decreased by 50 basis points to 1.75 per cent.
On the other hand, the interest rate on the deposit facility remained unchanged at 0.25 per cent.

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13 May 2009

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