We are not being difficult, HSBC executive insists

A top HSBC official has denied accusations that the bank was being difficult with its clients and said meetings were held to clarify the "mistaken general views".

HSBC's head of commercial banking, Richard J. Cottell confirmed he had talks with the Parliamentary Secretary for Tourism and with the president of the Malta Hotels and Restaurants Association on the bank's policy to provide a one-year loan moratorium for hotels.

He said MHRA president Kevin DeCesare and Parliamentary Secretary Mario de Marco had received complaints that HSBC was being difficult with its clients in providing a loan moratorium, which had been agreed upon between the commercial banks, the Tourism Secretariat and hoteliers.

"I met with Kevin DeCesare and Mario de Marco. They expressed a general view that HSBC is being difficult but when I asked for specific cases none were forthcoming," Mr Cottell said at the end of a business breakfast hosted by The Malta Business Weekly yesterday.

While saying that HSBC did not want its clients to struggle, he insisted that the bank could not agree with a "blanket 12-month moratorium for everybody".

The bank would evaluate any client requests on a case by case basis and if it was deemed that a six-month moratorium made enough business sense for the client it did not need to give a longer period.

"I explained to Mr DeCesare and Dr de Marco that the bank will sit down with its clients and discuss their needs individually. We want to know how our clients intend utilising the money they will be forfeiting on their loan, whether they will be using it to prevent lay-offs or to refurbish the hotel rooms or whether they will be investing it in marketing. We don't want the moratorium to be an excuse for clients to draw cash out of the business because that would be counterproductive," Mr Cottell said.

He added that HSBC had no problem with discussing a moratorium, even if it was longer than 12 months, as long as a sensible business plan was presented to the bank by the client.

"However, no moratorium would help a poorly run business recover," he said.

Asked about the repayment terms once the moratorium period was over, Mr Cottell insisted such an issue was discussed individually with each client.

"We cannot have a standard agreement that treats everyone in the same way because the market is so volatile and 12 months is a long period. It is all a case by case basis and we are ready to play our part," he said.

On another topic, Mr Cottell defended the bank's decision not to reduce the interest base rate in line with the European Central Bank's recommendation.

He said the bank had reached its conclusion after comparing the cost of borrowing in Malta with that in the rest of Europe and found that loan interest rates were competitive.

"We have a responsibility towards our depositors and a responsibility towards our borrowers. The reality is we have more clients who are depositors and we need to make sure the institution remains attractive enough for depositors, otherwise they would look elsewhere to reap better dividends from their investments," Mr Cottell said.

He argued that a strong depositor base gave the bank the necessary liquidity to provide borrowers with the cash they needed, adding the bank relied entirely on its depositor base to finance the loans it issued.

"We adopt a prudent policy that tries to strike a balance between depositors and borrowers," Mr Cottell said.

Some have questioned the bank's justification that it wanted to safeguard depositors by leaving interest rates untouched. Economist Lino Spiteri had written in The Times that "by not changing interest rates again on both sides of their balance sheet banks safeguarded their profit outturn".

Mr Cottell was unfazed by such comments insisting it was the company's responsibility to generate profitability to be able to distribute a dividend to its shareholders. "We want to protect our revenue stream, act prudently and generate profitability, which has become difficult in the current economic scenario," Mr Cottell said.

ksansone@timesofmalta.com