EU rules 'do not regulate bank fees, interest rates'

European Community rules do not cover the administrative fees or interest rates charged by banks, the European Commission has said in reply to questions put by Labour MEP Joseph Muscat.

Mr Muscat asked two questions in the European Parliament in a bid to get the EU executive to comment on current practices adopted by the local banking sector.

In the first, he asked for the Commission's reaction to the level of administrative fees being charged by the banks, complaining that they are too high compared to other EU banks "and make up a significant percentage of the banks' revenues".

In the second question, he asked the EU executive to state its position on the practice of banks regarding interest rates. He claimed Maltese consumers are repeatedly being faced with a situation where when the base interest rate is raised, bank debtors are immediately charged higher interest while depositors only start to get higher interest earnings once their deposits mature.

Internal Market Commissioner Charlie McCreeve replied that administrative fees differ between banks and between member states. But community rules do not regulate the level of administrative fees charged by banks. This is a purely commercial decision to be taken by the banks, he said.

"The Commission does not have any specific comments on the level of administrative fees charged by Maltese banks," Mr McCreeve added.

On the issue of interest rates, Mr McCreeve said that in general, credit institutions are subject to community legislation in the field of financial services and competition law. But there are no specific EU rules on this. The increase of base rates should be reflected by individual banks on ongoing retail contracts, such as mortgage loans or deposit accounts.

"In principle, this is a commercial decision by banks and a contractual issue between them and their clients," the EU internal market chief said.

During their last financial year, the two major banks, HSBC and Bank of Valletta, posted an amalgamated pre-tax profit of almost Lm80 million.