Finance Minister Edward Scicluna has kept up the pressure on regulators to relax their discretionary powers, saying that the current situation was not beneficial to the economy.
“I know how the regulators work and there is an element of risk aversion: it is easier to refuse a licence than to take a risk. And things are taking far too much time on all fronts,” he said.
The minister first pointed a finger at regulators during his speech at the recent 25th anniversary party of the Malta Stock Exchange, when he said: “Regulators must understand that the objective was ultimately financial stability to achieve economic growth and create jobs – and not to stifle investment. Regulators have tremendous discretionary powers. We respect their independence, but people will judge them not for their bureaucratic practices but on whether they participated in the development of the country.”
We do have a problem because there is not enough credit. There is too much bureaucracy and duplication, whether it is anti-money laundering or financial regulation per se
Speaking to the Business Observer, he said the higher level of regulation was a “normal and justified knee-jerk reaction to the financial crisis”.
“There was too much risk-taking and very little supervision of the somewhat vague capital controls and so on. Various pieces of legislation were introduced in quick succession after 2008. I was elected to the European Parliament at that time so I saw it all taking shape. I had brought this up with Jonathan Hill when he was the Commissioner for Financial Services and in his last speech he made reference to the arsenal of financial regulation,” he said.
Mr Hill had said that as part of the Capital Markets Union action plan, it was important to look at the financial services legislation that the EU had passed “to make sure it is working as intended”.
“Respondents to our Call for Evidence have said that overall the measures put in place following the crisis are working well, but that in places our legislation is not proportionate enough, that it could be weighing down the amount of financing available to the wider economy and that the compliance burden is too heavy,” he said.
Prof. Scicluna likened the various pieces of legislation to medication. “Each pill may be working on its own but we have not yet examined the overall impact of this cocktail of medications. The doctor would need to see whether they work together and what the side effects are,” he said.
The minister did not pick on any particular institution but rather said that new and established institutions, from the European Banking Union to the Single Supervisory Mechanism, all wanted to flex their muscles.
“We do have a problem because there is not enough credit. There is too much bureaucracy and duplication, whether it is anti-money laundering or financial regulation per se. I feel that there is an overkill.
“Business people went to the Prime Minister to complain that banks were closing their accounts and so on. I don’t want to interfere in banks’ practices but everybody is scared of the legislation which we built ourselves and we are now in a situation where we cannot move.”