Sant tells European Parliament it’s not the time for increasing loan charges

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Sant tells European Parliament it's not the time for increasing loan chargesLabour MEP Alfred Sant warned that now is not the time for increasing loan charges or for banks to reduce lending.

In an explanation of vote delivered during the last plenary meeting of the European Parliament in Strasbourg, the Maltese Europarliamentarian declared that in the changes being introduced to implement the European Banking Union, greater attention needs to be given to how the changes will increase banks’ expenses and how they will affect banks’ propensity to issue loans to firms, especially smes.

The vote was on an EP resolution giving powers to the European Central Bank to charge fines and impose sanctions on banks operating in the eurozone, when they fail to observe the new rules of the Banking Union.

Along with the rest of the Socialist group in the EP, Sant abstained on the vote but he also gave his reasons for doing so.

Sant said that certain changes in European banking systems were necessary to ensure that banks are being run prudently and transparently.

“On the other hand, a balance needs to be maintained to ensure that changes do not merely burden banks with new expenses in order to implement the new regulations, for this will raise bank lending charges and make banks more risk averse,” he said.

Sant queried whether such a balance is being achieved.

This the full text of Sant’s statement:

“In reforms being introduced as part of the Banking Union, we need to give more attention to the impact that the ongoing changes will have on operating costs of banks and on banks’ propensity to lend.

In Europe, bank lending is much more important to mobilise funds for investment projects than say, in the US. Necessary as they are from a certain perspective, current bank regulation proposals will inevitably raise operational costs.

So will the measure by which the European Central Bank will hold new powers to impose sanctions.

The measures could also make banks think twice before they lend on projects that they might consider to be problematic under the new circumstances.

So, costs to lenders could increase even as the latter will find it more difficult than before to raise project funds. This is hardly the time to raise lending costs or to promote more risk averseness in the banking system.

A balance must be kept between the need for banking institutions to be run prudently and transparently, and that other need for banks to respond quickly and efficiently to project proposals.

Is this balance being reached at European level?

The question remains open.”

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