Letters | Sunday, 19 April 2009

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Banks – an unaccountable elite

I read with interest the comments made by the former governor of the Central Bank of Malta (Francis Vassallo) in a recent business publication. In this commentary, Mr Vassallo makes some rather intriguing remarks and asks pertinent and forthright questions of mainly indigenous Maltese banks regarding their abject failure to heed or comply with the guidelines as to interest rate applications as laid down by the European Central Bank (ECB).
However, he does so from a safe distance and in full knowledge that his relinquishment of his former exalted post now exempts him from the onerous responsibilities and liabilities associated with the duties attached to his previous position, and thereby sets him free to be more liberal and sage with his comments. I happen to fully concur and endorse his submissions however, why should he only forward such sapient counsel at such a late stage in this financial turmoil situation? I cannot recall him feeling so empowered to offer such elevated wisdom and definitive protocol declarations to adopt when he held the reigns of office as Governor of the Central Bank, and was therefore in a position to apply such gentle encouragement to Maltese banks.
He calls upon the incumbent Governor of the CBM to use “moral persuasion” to bring about a recognition of the complexity and gravity inveigled within the current financial quagmire we find ourselves embroiled in, by “asking local banks to play their part to help all parties in this financial crisis”. Moreover, for them to “reduce their respective base rate in the same percentage and manner by which the ECB has done and not by strengthening their balance sheets”. All mighty magnanimous sentiments that leads one to believe that the ex-Governor now inhabits a parallel universe when proffering such futile suggestions.
I put it to him, why should the banks (and they are the indigenous Maltese ones in the main) give any credence or cognizance to such suggestions; furthermore, on what grounds would they be compelled too? For the banks are not remotely interested in anyone else’s problems or precarious situation other than their own avaricious circumstances and moreover, are perfectly within their legal rights to act with impunity to any directives from the ECB, or any other entity for that matter, as no legislation measures exist to prevent such callous and acquisitive disregard to such instructions.
No amount of “moral persuasion” to set interest rates in line with ECB policy, or with regard to many other highly restrictive and unilateral terms and conditions also, will make a scintilla of difference to the banks’ relentless and irresponsible quest for never-ending profit margins which is of cardinal concern alone to them.
In any event, why appeal to morals when it is patently apparent none are possessed? I venture to suggest that unless adequate and robust legislation is drafted to enforce banks to comply with and adhere too such authorities guidelines as the ECB they will remain free to cultivate a Blunder and Plunder policy unabated in their own irreverent and reckless manner and carry on constructing more “Houses of Cards”.
Yes such legislation would seriously impinge upon and affect the free market trade protocol, or at least require stringent concessions thereof. Well, so be it. For drastic times call for drastic measures, as until such dynamic measures are enshrined in legislation to rein in their powers, banks’ will remain unconstrained to comply with any guidelines, instructions (call them what you may for they are all unenforceable) by any entity, whether it be the ECB, the CBM or the Bank of England for that matter.
They will still be an unaccountable elite over whom we shall have virtually no control, as they will retain the power to dictate and decide what whatever policy or criteria best suits their needs, and theirs alone and will remain enabled to act independently whilst no measures are in place to restrict such iniquitous activity.
In conclusion, Banks don’t do recession – but they are prone to excess-ion. In the immortal words of Marx, banks want to privatise their gains, but socialise their losses. Bring them to heel before it’s too late and they drag us all down!

Peter Murray
Mosta

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