Prime Minister Joseph Muscat yesterday waded into the debate on interest rates offered by local banks, making it clear that the government is in favour of more competition.

Speaking during the inauguration of a new branch in Mosta by Portuguese bank Banif – its 11th – Dr Muscat hinted that the government was in favour of lower rates.

Although interest rates in the euro area have been at a record low for the past few years, particularly due to the financial crisis, the major Maltese banks have kept them considerably higher.

This has come under criticism from financial operators.

The governor of the Central Bank of Malta has expressed himself in favour of more competition on rates and a lower cash-cost for the business community.

The major banking players are holding their ground, saying the Maltese banking sector is different to other countries.

Dr Muscat yesterday said that the Ministry of Finance, together with other supervisory authorities including the Malta Financial Services Authority, as well as the banks themselves, were studying methods aimed at becoming more competitive.

Admitting that this is no easy task, Dr Muscat said competition is crucial for the country’s economic development.

The Office of Fair Competition has started its own inquiry focusing principally on interest rates on loans charged by banks to SMEs, interchange fees and merchant service charges.

In the first phase of this inquiry, the office has been in contact mainly with the core domestic banks and has asked them for both quantitative and qualitative data.