Malta Today
This Week Sport News Personalities Local News Editorial Top News Front Page This Week Sport News Personalities Local News Editorial Top News Front Page


powered by FreeFind

Malta Today archives

The National Bank • January 18 2004

The National Bank Scandal - Part 7

The National Bank – the skeleton in the Bank of Valletta’s closet

A shareholder with nothing to say? – Nationalist MP Alexander Cachia Zammit

In his winding up of the parliamentary session that was to kill the National Bank, Opposition Leader Gorg Borg Olivier informed MPs that the Opposition had heard a different story about the whole sequence of events that had led to the demise of the National Bank.
Borg Olivier never expounded in Parliament on what he had been told by shareholders, directors and possibly even relatives of MPs. There had been little opposition throughout the session. Some would say it was because he had been given ten minutes in which to study the National and Tagliaferro Banks Bill beforehand. In other ways, the PN seemed to have had offered little resistance on the day the Bill was passed.
But it was strange that a Nationalist MP, former Health Minister, Alexander Cachia Zammit, who was also a National Bank of Malta shareholder, failed to stir up any concern for the fate of the shareholders in the parliamentary sessions which were to see the National and Tagliaferro Banks law passed by both sides of the House.
During the parliamentary session Cachia Zammit asked Mintoff whether he was only expecting the shares of the estate of Count Alfred Sant Fournier and Marquis John Scicluna to be transferred to the State in order to notch up the required two-thirds of shareholders, needed to ensure the complete transfer of the bank. Over 1,000 shares were at stake in the Second Hall of the Civil Court case involving the Sant Fournier and Scicluna estates.
Cachia Zammit also asked Mintoff about the signature the government was expecting from the National Bank shareholders, in order "to avoid any misunderstanding." Mintoff started explaining what the new law he intended passing through Parliament that evening would mean. Only minutes later news arrived that the Second Hall of the Civil Court had accepted the share transfer, and Mintoff announced the news amid applause from his MPs.
Mintoff explained to Cachia Zammit that the reason the signatures were needed was to ensure Government could proceed to build a new bank out of the National Bank of Malta, and this warranted the signatures of the National Bank’s shareholders.
But Cachia Zammit made no attempt to challenge Mintoff’s plans to take over the bank. He said he wanted to seek clarifications about the shareholders that had not signed off their shares yet and whether there was need to deal with those shareholders.
Maybe Cachia Zammit was expecting the court marshals to arrive for his signature. It was evident from Mintoff’s speech in Parliament that the marshals had targeted the big shareholders first. Cachia Zammit, with a minimal two shares according to a 2002 list of National Bank shareholders, may not even have been approached. And he wanted to know what would happen to those shareholders who had not signed their shares yet.

Mintoff: "Now they are telling me we have these shares…So this hurdle appears to be no longer."
Cachia Zammit: "Now I am clear on this position because this was a very delicate matter, and the fact…"
Mintoff: "We had a misunderstanding."
Cachia Zammit: "… that the Prime Minister said that the Second Hall had now approved the share transfer…"
Mintoff: "The ones from the Second Hall were a small part, just some 900 out of 6,000."
Cachia Zammit: "It was enough to reach the two-thirds."
Mintoff: "There are even more now. They are saying there’s more."
Cachia Zammit: "This is where I want to be clear. That means that for those who have not signed or who have not been approached to sign, there is no scope for them."
Mintoff: "No, no, because the two-thirds…"
Cachia Zammit: "Who hasn’t signed hasn’t done anything wrong…No. That’s it. I wanted to be clear."

On Thursday, 13 December 2004, following a one-day closure, the National Bank of Malta and its subsidiary, Tagliaferro Bank, were re-opened under the administration of the Council of Administration, providing limited banking services to industry and hotels.
The three-man council was made up of Maurice Abela, the Secretary of the Ministry of Commonwealth and Foreign Affairs, along with Dennis 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.
The new guidelines at the National Bank restricted banking services: depositors could only withdraw up to a maximum of Lm50 a week. Permitted transactions were limited for the purpose of payment of wages, raw materials, exports and imports and other expenses.
That day it was also reported that Steve Mogford, senior managing director of Barclays Bank International, flew to Malta for talks with Dom Mintoff and senior Central Bank officials on proposals to form a new company in association with Barclays Malta, to take over the National Bank of Malta. There had been inklings that Barclays Bank, which had made an offer to National Bank director Adrian Busietta for bridging finance throughout the run, had succumbed to Mintoff’s plan to take over. Attorney General Edgar Mizzi’s comments to Adrian Busietta that Barclays Malta director Louis Galea ‘had swallowed the pill’ was a sign that there would be no help coming from Barclays Bank International.
Despite all, nothing would come of the joint takeover by Barclays Bank and the government. Writing in the Financial Times of Friday, December 14, 1973, Michael Blanden said that Barclays Bank had said in London that it had received no proposals from the Maltese government to participate in the operation to ‘rescue’ the National Bank. According to the report, Barclays Bank Malta was also encountering a run on its liquidity. Louis Galea quashed the suggestion, and denied the bank was leaving the island.
On Monday, December 17, 1973, Nationalist MP GM Camilleri tabled a parliamentary question to Dom Mintoff asking him if he would be considering setting up a Commission of Inquiry in connection with the National Bank, the Scicluna’s Bank and Tagliaferro Bank. Camilleri had based his question on statements made by Mintoff concerning an assurance he had from the Central Bank that the National Bank of Malta had been in a sound financial position and that there had been unfounded rumours.
Camilleri suggested the Commission be presided by a former member of the judiciary, assisted by a banker and an accountant, to establish who had started the unjustified rumours which caused the run; to ask if there had been any real danger of the National Bank going bankrupt, and to investigate the way in which some of the shareholders had renounced their shareholdings.
Camilleri also demanded that Mintoff presents the balance sheet of the National Bank before moving the resolution for the appropriation of Lm1.8 million to be contributed by Government to acquire 60 per cent of the shares of the new company that was to replace the National Bank. Mintoff however answered that an inquiry would only be held on grounds of mismanagement. A month later, on 31 January, 1974, he ruled out holding an inquiry citing that it would be superfluous to find out who had started the run.

BOV – a bank with a skeleton in the closet
On 24 March, 1974, the Bank of Valletta opened for business, a bank that had been created by Mintoff on the forced appropriation of the assets, properties and money from the National Bank of Malta shareholders.
There had been no form of consideration for the shareholders and directors – none of them would be re-employed. Everything had been lost. "Our job and our bread and butter was of no importance to the new authorities of the bank," Adrian Busietta would later write in his 1994 affidavit, "who were all political appointees, as were those of the council of administration, such as Maurice Abela and Dennis de Giorgio."
To set up the Bank of Valletta, the government issued a stand-by of just Lm3.3 million against more than Lm37.8 million that the National Bank of Malta shareholders had left behind as basic assets. Was this the bank that was in danger of bankruptcy? Was this the bank that had warranted seizure by the government for the people? And why was the Lm3.3 million which the government fronted for the start of the Bank of Valletta, not given to the National Bank of Malta directors during the run, to ensure there would be enough cash to meet the run on the bank?
In its new accounts the government made "provision" for "bad debts" of almost Lm6 million. It would later emerge that the provision was based on a Property Index compiled by the council of administration. The Index decreed that real estate prices had dropped and deduced that loans forwarded by the National Bank to property developers would never be recouped because of the tumble in real estate value. The index was a smokescreen to cover the fact that the National Bank of Malta had never been in financial trouble at all.
The Bank of Valletta was profitable from the first year, a confirmation that the shares the National Bank shareholders were forced to give up had not been devoid of value. The final transfer of hundreds of outstanding shares was later effected by the council of administration itself, in accordance with ex-officio powers given by the unconstitutionality of the National Bank and Tagliaferro Bank Act.
Adrian Busietta would write in his affidavit how life savings of shareholders were blown away through Mintoff’s own hurricane of state capitalism:
"Dr Attard Montalto and I used to administer B Tagliafferro and Sons, with 2,328 ordinary shares of Lm100 each in the National Bank of Malta, apart from being curators of 191 ordinary shares from the Count Sant Fournier estate…the two of us held 25,000 ordinary shares in Tagliaferro Bank…in this way, Dr Attard Montalto and I held approximately 30 per cent of the National Bank of Malta between us …
"We had every good reason to want to resist Mintoff and his takeover, to save all those assets that were legitimate and the fruit of an unrelenting endeavour to make these banks the best in Malta. As is the Bank of Valletta today. But the unjust methods of duress and abuse of power used by Mintoff were too strong for us to stand up to such confusion without hurting many people. So, once it was clear that he wanted to take over the bank, we decided we had better pass it on to him as he wanted it, in one piece, so others would not suffer."

Newsworks Ltd, Vjal ir-Rihan, San Gwann SGN 02, Malta