Banks are not lending! No wonder that many of us are asking what is the role of the banks nowadays when they have reduced their role to that of collecting money from Malta to finance their operations abroad. 
When we hear about the new foreign banks that are operating from Malta we tend to think of them as banks in the traditional sense of the word. But when you knock on their door and ask for credit facilities, even against security, they bluntly tell you that they do not provide credit facilities: they are not lending institutions.  But is lending not part of the role of a bank?
The obvious question is whether we have two types of banks: that is, the “normal” bank which provides credit facilities, and the “new” type of bank, which is only here to make money out of our money without giving anything in return.  As far as I know, there is nothing which tell us consumers that there is any difference between one and the other and I cannot understand why the Malta Financial Services Authority grants them the same type of licence as the “normal” banks. 
It is the sacred duty of MFSA to inform us if it is true that these banks are allowed not to provide credit facilities and if so, why they have been granted a licence to operate as banks in the first place. Or have we rendered the role of the bank to that of Dickens’ Scrooge, collecting money from Malta and excluding all credit facilities?
Not only that, but even what we know as “normal” banks are being very difficult when it comes to credit facilities to small and medium enterprises.  I cannot understand why – for a credit facility of €l00, 000, for example – the bank expects us to give as security more than five times the amount and not only that, but they are now making it obligatory to sign a constitution of debt and to give the property on trust. In other words, they are writing the death sentence to any businessman.
I say so because any person who signs a constitution of debt with any bank can rest assured that he cannot be trusted by any other bank and this is not fair because let us be honest, when it comes to bonds issue or investments, the same banks take little precaution and rightly so, because the phrase “the value of the investment can go up or down” saves them from disaster.  But that only applies to them investing our money.
When it comes to us investing their money, then the tables turn and the banks demand security against security. I do not understand why the Malta Financial Services Authority allows this two weights and two measures attitude and does not interfere to make sure that the banks are not over-protective and make it practically impossible for the small and medium businessman to continue to operate. Because let us face it, the problem at present is not the assets, but it is a liquidity problem and it is a shame that the banks are making it practically impossible for any small businessman to get credit.
There is no doubt in my mind that the banks in Malta do not wish to remain as a main source of credit – of course they have spotted a niche of liquidity in these islands, they have exploited this niche so that many of us have invested with these banks but in return, these banks are very reluctant to invest with us. The big four are making it very difficult to grant credit facilities and the others come here purely to speculate with our money and full stop.
There can be many reasons why this is happening: the investments schemes are a safe source of income at virtually no cost, as they do not have to incur in credit screening, risk measurement, monitoring, etc.  The banks prefer to finance big firms. The banks prefer to finance their operations abroad thus hampering the long-term economic health of our country. 
We must not forget that commercial loans to main street merchants are likely to be the source of continued employed opportunities for the community, and the banks, through their stringent loan policies, are practically telling us that they no longer want to be involved in promoting the growth of existing local businesses, the formation of new local businesses and the attraction of new investment.
All of a sudden everybody wants to think big: big banks, big investments, big people… but big and small have already lived together and in this country we can never ignore the small and medium-sized businesses. Big investments are a blessing but so are the small and medium-sized businesses and the banks cannot be so short-sighted as to focus all their energies on big investments only.
It is true that banks and other local financial institutions have increasingly focused their efforts on satisfying their shareholders by looking for investments which provide the highest rate of return. As a result their investment money has gone elsewhere, to the big firms or even to other parts of the world. In so doing, they ignored their responsibilities to the local community in which they are based and from which comes most of their business. 
Whether the government likes it or not, and as long as the MFSA continues to stay aloof, there will come a time when the government will have to interfere because companies that go bankrupt because of the stringent lending policies of our banks mean more unemployment and economic instability. 
Local banks, on the other hand, need to get themselves reacquainted with their need to be locally involved. It is no longer the case to involve only employers, employees, and the government in our economic forum; local banks and financial institutions also have to be included as integral members, because they play a pivotal role in our economy.
The question is whether local banks and lending institutions are actively involved in local efforts or whether pressure should be put on them to be more responsible to their client community. The financial leverage which banks can provide gives an invaluable resource to local efforts and should be considered a key ingredient of any revitalisation effort.