National Bank • January 18 2004
The National Bank Scandal - Part 7
National Bank – the skeleton in the Bank of Valletta’s closet
shareholder with nothing to say? – Nationalist MP Alexander Cachia
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
"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
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."
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
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
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
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
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
"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."