Interest rates after January 1

While most of the information now being passed on to the public by NEEC during those pre-8 p.m. TV news slots is generally correct, the same cannot be said for the impression that many televiewers may be going away with from that particular one about bank interest rates available on the local market after the coming January 1, 2008, i.e. after Malta's entry into the eurozone..

I appreciate that it is difficult to give a detailed and total picture of what are essentially technical matters in a 30-second slot. But saying that after January 1, 2008 the locals' mortgage, or other, rates will be exactly identical to those applied to the general public by banks in other eurozone member states, is incorrect.

Yes, there is and will be, the European Central Bank which, having become the sole arbiter of monetary policy across the eurozone will still have its basic central intervention rate, and that rate will also be the central intervention rate applicable within eurozone states. But people will make a big mistake if they reason that such central intervention rates are the only determinant of money or capital market rates applied across the board. From there on all banks in the eurozone, now and similarly in the future, will still continue to apply market determined interest rates, naturally according to their own resultant individual cost of funds-raised/funds used profiles, and in relation also naturally to their own ALM (asset-liability management) situations, aimed-at net interest margins, operating costs, and other factors.

The ECB determinant into this total matter is therefore only really circumscribed to the areas of where individual eurozone banks have any dealings (some of course obligatory via e.g imposed reserves with the ECB/ESCB) with so many other determinants being in essence present as normal everyday features of money and capital markets. So, for anyone to go away thinking that his house loan interest rate, or his agricultural operating overdraft, or whatever borrowing facilities he may be receiving from his Malta financial institution, or even whatever he may be getting by way of credit interest, will be identical to, say, what similar institutions will be charging in, say, Italy, Greece, Cyprus, or any other eurozone country, is totally wrong.

The sooner that NEEC slot is corrected the better for everyone. It is not salutary for anyone to let use of the media place him in a situation where he would later be heavily disappointed. Fact: interest rates across the eurozone (even though this is factually one single financial services market) are simply not identical. In no other European market for any other product or service is that in fact the case.