The setting up of a Development Bank is a laudable step taken to relieve commercial banks of the onus to finance long-term capital projects.

I have given a cursory look at the Bill establishing the Malta Development Bank. This Act empowers the minister to appoint the chairman and four directors of the new bank. Another two directors are appointed by the minister on the recommendation of the Malta Council for Economic Social Development (MCESD).

The minister also appoints a supervisory board to oversee the policy pursued by the management (sections 21 and 27 of the Bill). Moreover we are told by the chairman of the Malta Financial Services Authority (MFSA) that the bank will not be regulated by them as the bank will fall under the remit of the minister. As can readily be seen, the minister is vested with very wide powers.

But why should this arrangement raise so many queries and reservations, even sending shivers down the spine of no-nonsense financial observers?

Recalling the fallout from the political interference in Mid-Med Bank in the early 1980s, and more recently the minister’s cavalier manner when he issued a ‘temporary’ government guarantee of €360 million through the Bank of Valletta (in which the government owns 25 per cent) to secure a loan to a private local company, perhaps one can start to appreciate the concerns being expressed. Will the minister resist the temptation of having a second go now that he owns 100 per cent of an unregulated bank?

Drafting the new law was the easy part. A lot now depends on the minister’s resolve to ensure that the policies and norms of the bank are sufficiently transparent and applicable equally to all so that doubts and suspicions that approvals for finance are colour-coded will not arise.

To make this possible, the policy of the bank must be made public so that any aggrieved party can challenge decisions and seek remedy. If the minister and the board rise to the occasion the Development Bank could be a success story or it could be a portmanteau of Air Malta.

This will not be easy for the minister as his immediate boss, the Prime Minister, has illusions that he saved Maltese banks from collapse and also that local banks are glorified safe deposit boxes.

In addition, the Prime Minister’s remark that he is disappointed with the level of engagement of banks might have been music to the ears, among others, of the Malta Development Association, who have Planning Authority permits for large projects in their pockets but not the cash to start building.

For the rest of us it is not music; rather it is the writing on the wall.