National Bank Saga • January 11 2004

Killing off the National…mission accomplished in 24 hours

Nationalist passiveness
On Wednesday, 12 December 1973, the shareholders of the National Bank of Malta, the island’s premier financial institution and merchant bank, would gasp their final breath as Mintoff concluded his takeover mission of the National Bank of Malta.
It seemed that even The Times of Malta was aware of the conundrum the shareholders found themselves in. The day following the creation of the Council of Administration, the body which took over the running of the National Bank of Malta, the newspaper even reported that the bank could have been in a healthy state, after all - quoting sources which claimed "the National Bank group would have shown a bigger pre-tax profit than the previous financial year" as 1973 drew to a close, and that "before the suspension of all banking operations, the group had some Lm2 million available in cash."
But the few lines at the foot of the report on the creation of the Council would have done little to provide respite for the shareholders who had been trounced by Mintoff’s wrath.
And it seemed that not even the Nationalist Party could help the National Bank of Malta shareholders. Even the shadow Minister of Finance, Nationalist MP Mario Felice, would stand up in Parliament to offer mere rhetoric and little analysis on the situation which the National Bank of Malta shareholders faced.
And Felice knew well the background to the National Bank saga: the day before the parliamentary session that would appoint the Council of Administration, on Tuesday 11 December 1973, bank directors Adrian Busietta and Philip Attard Montalto went to seek advice from him.
It was a shock for the two directors to realise that Felice was suggesting to them to "lay down arms" and let Mintoff take the bank for, "as we understood him, to mean ‘whatever Mintoff wanted, Mintoff took!’," Adrian Busietta cites in his court affidavit. "Dr Felice reminded us that Mr Mintoff had television under his control – apart from being the minister responsible for the Police and the Armed Forces. How could we resist him?"
Indeed, there would be little, or no resistance from the Nationalist Opposition during the debate that saw the National and Tagliaferro Banks Act being rushed through Parliament.
On the evening of Wednesday, 12 December 1973, Felice congratulated the sense of sacrifice and great loyalty of the shareholders that had given up their shares: "… Many of them have no money other than these shares, and this is their livelihood… these people did something good that is in direct contrast to the action of those who committed the disgusting and ridiculous action to have brought these shareholders in the situation they find themselves in – in my opinion – and one cannot but publicly congratulate these people who have renounced their life savings.
"Relatives of mine have had to do this. I see this as a serious act, one of courage, as much as the act committed by who brought about this situation was disgusting (Hear, hear)…"
Felice lauded the government’s initiative to have a Council of Administration continue banking operations at the National Bank of Malta (albeit limited), and also that the government had diverted the immediate danger of industrial collapse:
"This means that for the time being, I personally agree with the government…Mr President, under these circumstances, I am not going to see what the government had to do in the interest of its shareholders; neither does it interest me, nor do I want to know…I understand government has not taken any risks, however it has taken a great responsibility which I am sure it will face in the best way possible in these circumstances along with the Central Bank and its advisors…"
Felice also said it would be good for the Prime Minister to appear on television to give the general public a "sign of relief" to show that what had been presented as the collapse of the entire national economy had now been saved by the sacrifice of the shareholders – even after Mintoff’s appearance on television on Monday, 10 December, had resulted in a further precipitating Lm1.3 million in withdrawals, sending total withdrawals up to Lm2.5 million within less than a week. The National Bank of Malta was running precariously close to the liquidity ratio, the mandatory level of liquid cash a bank had to keep by law.
"Government is going to profit greatly from the sacrifice of these shareholders and will now be in a better position to quickly take power in its hands… that is why I feel, Mr President, that from a very dark cloud where one could have foreseen a great disaster, the position we are taking today will enable us to find a solution faster, and not only practical, but also an equal solution for many people.
"Mr President, I feel that whoever was part of these negotiations has reaped a good result. I conclude by congratulating these people who helped those who could have been in an embarrassing situation had this bank found itself sinking. My congratulations go to the shareholders… (Hear, hear)."
Mintoff said the government had taken great risk to ensure the National Bank of Malta stayed on its feet, even after its parastatal companies had threatened to remove its Lm4 million in deposits – Mintoff himself had threatened the National Bank management that he would withdraw monies of the parastatal companies and parade the vans with the money in Republic Street, if they did not acquiesce to his demand to have the bank transferred over to the government.
Mario Felice, the Nationalist MP, said the shareholders had been sensible to transfer their shares over to the government. It seemed that the Opposition was not interested in picking a fight for the sake of the shareholders, even though certain MPs knew then the concerns expressed by the National Bank of Malta shareholders and directors.

Fenech Adami raises his doubts
As the reading of the National and Tagliaferro Banks (Temporary Provision) bill reached committee stage, Eddie Fenech Adami emerged as one of the sole Nationalist MPs to raise doubt about the general reading of the bill that was to create a Council of Administration to take over the National Bank of Malta.
The bill was intended to temporarily entrust the administration of the National Bank of Malta to a Council of Administration, subject to certain restrictions and limitations. but able to exercise all powers and functions formerly in the hands of the directors and shareholders.
The three-man council of administration would begin managing the National Bank the day after, on Thursday, 13 December, 1973, as well its subsidiary Tagliaferro Bank, providing limited banking services to industry and hotels.
The Council was made up of Maurice Abela, the Secretary of the Ministry of Commonwealth and Foreign Affairs, along with Denis Degiorgio – a branch manager from Barclays Bank International – and Antoine Tagliaferro, one of the general managers of the National Bank of Malta. Lino Spiteri, then working with the Central Bank, was appointed as Controller.
Eddie Fenech Adami however raised doubts on clause six of the bill, which read: "The Prime Minister may by order in the Gazette exempt the Council or any member thereof, from complying with any provisions of the law of Malta relating to commercial partnerships with which, in the opinion of the Prime Minister, it would not be possible or appropriate in the circumstances to comply."
Eddie Fenech Adami: "I don’t know, I understand there could have been reason for this exemption. But is there something in particular for laying down this clause, or simply just ‘if anything crops up’?"
Guze Abela (Finance Minister): "No, no, this is just in case something crops up. This is to be covered in everything."
Mintoff: "I can say that this has been drafted by the legal side. It does not say…"
Fenech Adami: "I don’t understand what this can be. For example, you are not going to say that they might not publish the balance sheet. I don’t think so, right?"
Hon. Member: "It could be."
Fenech Adami: "But can he say that, I don’t think he is going to say that?"
Joe Brincat (MLP): "This is a blanket clause."
Fenech Adami: "Everything is ‘blanket’ here."
Despite the doubts raised by Fenech Adami at the final stages of the reading, the National and Tagliaferro Banks (Temporary Provision) bill was passed through all stages, and Mintoff had in fact created a very wide provision that would confer the most arbitrary of powers within the Council of Administration. Clause 6 of the bill rendered the Commercial Partnerships Ordinance ineffective through this blanket provision whereby the limited liability safeguard contemplated by the Ordinance, could be lifted at any time. Mintoff had reserved the right, after threatening the shareholders with the removal of their limited liability, to actually still have the power to make them liable for any financial deficit that may result once the bank was handed over to Government.
Mintoff may have not had the two-thirds of signatures needed for the transfer of assets and liabilities to the government, so he kept in his power the possibility of threatening the shareholders with the removal of their limited liability. His intentions were as clear as crystal.
Commenting at the end of the debate, Mintoff said this had been the first time that Government and Opposition had co-operated in finding a solution "to a grave problem," hoping that the "shattered confidence in the bank" would be regained.
Parliament rose at 10pm that evening. It had been a hectic day for Mintoff. But he had managed to seal the fate of the National Bank of Malta once and for all. The National Bank of Malta, Scicluna’s Bank and the Tagliaferro Bank were no more. Their demise at the hands of the fiery premier had paved the way for a new government venture, one that had been orchestrated beforehand at the hands of the self-style, socialist saviour of Malta.