Friday, 15 December 2000

Where are the Regulators

The Malta Independent

Where are the Regulators`

The way the Maltese consumer continues to be abused and ignored by the Authorities and Regulators whose primary aim should be that of` protecting his or her interest is just amazing.

If you communicate through` electronic mail you must be fed up to your neck by sudden inability to communicate across the network of the various ISP groupings.` You probably don`t careless whether Melita Cable is acting abusively in blocking other ISP`s out of its internet on cable network and similarly you don`t have a firm opinion whether it is legal for these ISP`s to build a sort of fence round their Maltacom`s network` excluding Melita`s own ISP. What you do care however is that your ability to send and receive messages across the net instantaneously has been crippled without as much as an advance warning.

In normal civilised countries such matters would be treated with urgency by a Regulator whose primary interest is defending your right as a consumer to get the service that you pay for. But it appears Malta is neither civilised nor normal. The Regulator first sanctioned Melita`s right to keep its cable network closed to other ISP and now probably has difficulty in forcing the other ISP`s to open op their network to Melita without appearing to use two weights and two measures. It appears that the last on our Regulator`s mind is the interest of the consumer.

The same can be said about how the Regulator in charge of investments in publicly listed companies is failing to perform its duties in defence of the private investors. In this case it is the Malta Stock Exchange that is failing its duty as Regulator.` The Exchange has a duty to keep order in the market which has to operate in a fair and transparent manner. How can the Exchange justify its inaction which jeopardises the interest of investors in Middle Sea Insurance to Government offering a sizeable block of Middle Sea shares at a price 44% below the market price when the offer was made How can the Exchange allow the Government to sell its holdings in Middle Sea at Lm2.28 when the quoted market price was Lm4.06`

The explanation is that the Government had made this commitment in June 1999 and had to honour such a commitment to the shareholders registered on the books of Mid-Med Bank on 5th April 1999.` This is no explanation at all. The Government should have offered these shares immediately and not sleep over the matter for 18 months and then create these monstrous price distortions. The Exchange should have forced government to do so and upon its failure should have suspended the shares of Middle Sea from trading until clarity and transparency` returned to the market. However the Exchange seems only willing to suspend share dealings when requested by the Minister and not when it is necessary to check the Minister as a major player on the market.

The same lack of transparency is being allowed to pervade the market in relation to Bank of Valletta and Lombard Bank shares.

With CCF, the largest shareholder with a significant control over Lombard Bank, now part of the HSBC group following a completed takeover of the French bank by the HSBC, private shareholders and the public at large have a right to be informed whether the Central Bank, as the banking Regulator,` will be allowing this dominance by HSBC on the local banking market. This dominance is` already well marked through its ownership of the former Mid-Med Bank. Or will the Regulator be addressing this dominance by forcing divestment on the part of CCF of its Lombard holdings`

It also overdue for private shareholders to be informed of government`s chosen method for divestment of its significant interest over Bank of Valletta through its 25% holding.` It makes the hell of a difference for the share price` whether these shares will be floated on the market or whether they will be sold to a strategic partner. The market should not be kept guessing government`s intentions.

After all the decision need not be that difficult. Selling this significant holding to a technical partner is the last thing the Country and the Institution needs. A technical partner in Bank of Valletta at the equity level would destroy the technical alliances built by the Bank with other local and foreign institutions at subsidiary and at product level. It would also double the exposure, created by HSBC`s takeover of Mid-Med, to conversion of the banking deposit base into foreign investment products of the foreign technical partner to the detriment of the Maltese banking industry itself.

It is time for` the Regulators to` make their presence felt by restoring confidence and transparency in the markets that have had a sombre performance in the year 2000.

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