Don’t hold back on company loans, Malta Chamber urges banks
Chamber warns that most businesses are operating at the extremes of their liquidity
by Massimo Costa
Banks must not reject company project loans without good reason, the Malta Chamber of Commerce has said, as it warned that many businesses had very little liquidity left.
Earlier this month, the Central Bank ordered local banks to grant a six-month moratorium on existing loan repayments, with interest being accrued not capitalised.
Questions have however been raised about whether this amounts to sufficient breathing space for companies which are struggling to cope with COVID-19’s economic fallout, especially those which do not fall under the government’s Annex A and B schemes for financial aid.
Asked whether banks should endeavour to do more to help companies, a spokesperson for the Malta Chamber told BusinessToday that the banking system must ensure that liquidity reaches businesses, while keeping the cost of borrowing low.
“Banks should not unnecessarily withhold loans for projects. Most companies are operating with a few months of liquidity, so timeliness with providing liquidity is of the essence,” the spokesperson underlined.
“Banks are encouraged to be flexible and align themselves with the short-term economic priorities and timeframes of business. The Chamber is satisfied, from its regular communication with the banks, about their intent to adopt a flexible approach.”
“On the other hand, banks are expected to filter this instruction clearly across their branch network,” he added.
The spokesperson said that the Chamber appreciated the fact that banks’ resources were not unlimited. “In fact, they are commensurate to the level of their depositors’ funds, which they must protect and are bound by strict regulation to do.”
Consequently, expectations from the banking system need to be realistic, since this could otherwise result in a dangerous backlash,” he highlighted.
