Leo Brincat raises questions over bond issues

Speaking to The Malta Financial and Business Times yesterday opposition spokesperson for finance, Leo Brincat, was reluctant to ‘name and shame’ the local bonds that caused him to speak out twice recently in Parliament on the pressing need for proper credit ratings for local bonds.

However, he did say that the bonds in question numbered more than one but definitely constituted the minority of bonds listed on the Malta Stock Exchange. Such potential ‘junk bonds’, he explains are those predominantly reliant on local market conditions and local consumption.

On the matter of the issuing of credit ratings, Mr Brincat is adamant that such ratings should be issued by the regulatory powers. Furthermore, such ratings should be issued in conjunction with such regulatory approval for launching a bond on the market.

Mr Brincat reiterated his call for investors to be properly informed and educated before jumping into an investment, citing as an example the fact that corporate bonds are listed separately from government bonds on the Malta Stock Exchange list but segments of the investing public would be unaware of what the distinction between the two is.

Speaking in Parliament last week, Mr Brincat is quoted as saying "Passivity in this regard [lack of consumer education and information] is nothing but criminal negligence."

He went on to say that ratings being given by the banks for local bond issues should be made public, adding that some bonds that had been issued carried a C rating, which he described as worrying and integral for the consumer to be informed of.

While the Malta Financial Services Centre is the only fiscal regulatory power with a consumer protection department, it has not yet taken up its new role and it is thought that it would be the MFSC itself that would be responsible for issuing such credit ratings if Mr Brincat’s timely wake-up call were to be heeded.

Mr Brincat explained that some Maltese had been hit badly by the abysmal performance of Argentine bonds of late, particularly after the bottom fell out from the country’s economy.

However, he explained that it is equally important for local investors to be made aware of the financial pitfalls of investing in local firms that were operating on a shoestring budget.