Most workers dread the time when they have to retire and live off a meager pension. Throughout their working years they make sacrifices to accumulate a moderate sum in the hope that the interest they earn from the bank would help them meet unexpected expenses in the event of a rainy day.

They are in for a surprise. Rain comes down pouring every day. They find that their bank will only pay them a fraction of a euro by way of interest. There is, in this scenario another player: the land developer/speculator. For every tower crane that dots our skyline one can rest assured that there is a bank loan running into millions of euros made possible not by the banks’ funds but by the accumulated savings of small depositors.

On their part, land developers/speculators in turn make more money than the bank does. As can be seen, in this particular sector there are three main players: the bank, the depositor and the developer who borrows the money from the bank. Of the three it is the depositor who comes off worst.

Clearly this set-up is making the poor poorer and the developers, who seem to have little respect for the environment, richer.  Aided   by   an acquiescent government, an ‘efficient’ Planning Authority and liberal bankers, this is a jackpot for the developers but a recipe for disaster for the environment.

What worries me is that, while our legislators have found time and energy to devise legislation like the Financial Services Act  and introduce fresh financial instruments, e.g. trusts to cater for the needs of those who have money problems (of the positive kind), they have  shown scarce creativity  to alleviate the small depositor’s plight.

This set-up is making the poor poorer and the developers, who seem to have little respect for the environment, richer

The authorities seem to be helpless and resigned to accept the present status quo as one from which we cannot extricate ourselves. As I write I recall the promise of the government to establish a development bank. Such a bank would need to raise funds to operate.

Would it then not make sense for the bank to issue development bonds at say 2.5 per cent giving preference to small applicants (pensioners)? If this is feasible, what are we waiting for? This is only one possible solution. There are other ways and means which I cannot go into here for reasons of space.

Needless to say these comments will attract a lot of flak. It is the easiest thing to find reasons why such suggestions are not possible but it takes a mental effort to propose alternatives. Probably we will be told that it is the EU’s fault.  I believe that if the political will is there, solutions will be found.

Understandably people ask how it is that we still cannot find ways and means to tweak deposit rates in favour of small account holders?  After all we have been able to abolish exchange controls and deregulate banks to the extent that commercial banks are allowed to borrow short from depositors and lend to speculators large amounts repayable from rents over a period of up to 15 or 20 years.

So why is the adjustment of deposit rates so difficult? We must not forget that, without the depositors’ funds, land development activity would grind to a standstill.

If you put this question to economists you will be regaled with a lecture on monetary policy, quantitative easing, unemployment and inflation that will leave you all agog. If you enquire about the rates of interest, the bank will explain how the directives of the European Central Bank affect your savings and remind you that there is the depositors’ compensation scheme to protect your savings.

If you ask a politician he/she will put your mind at rest that the economy is going strong and that you never had it so good, forgetting that now that we have reached full employment and an acceptable rate of inflation we in Malta at least, might not need low interest rates.

Their answers are legalistically correct but there is an overriding truth which all the above answers ignore.

And that is that a gross injustice is being perpetrated against the small depositor and nobody is doing anything about it.

Joe Pace Ross is a retired banker.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.