|
Banker Anthony R Curmi takes MaltaToday columnist Karm Farrugia to task about the respective roles of the National Bank of Malta and Barclays and states that the British bank was the more ready lender In my opinion Karm Farrugia (‘From NBM to HSBC – getting even,’ MaltaToday, March 28) was off the mark when he claimed that the National Bank of Malta and not Barclays participated most in the, sometimes risky, financing of Malta’s industrial development.
I myself can claim quite the opposite as in those days I was close to the bank lending situation and so knew what was really happening. With due respect to Mr Farrugia, I think that what he said was not the case. I say so because I was based for many years at Barclays Local Head Office in Malta initialling heading its ‘Advances’ department (wherefrom all bank lendings of whatever nature in excess of branch managers’ discretionary limits were approved and controlled) and, later, as Assistant General Manager (Advances) with broader responsibilities.
It is a fact that Barclays’ standards for assessing lending proposals were superior to those of the NBM. Therefore the perception of those whose applications were either trimmed or turned down completely, was that Barclays was reluctant to take any risks in financing Malta’s industrial development. But surely this reflected a more professional approach that, after all, was very much in the interests of bank depositors and also of the would-be borrower whose eyes may have been opened to the fact that the project was under capitalised or possibly a non starter involving grave risks to the entrepreneur himself!
One is prompted to ask how many bankers in the true sense, as distinct from businessmen, graced the NBM’s board of directors. Also did the Bank’s board members and senior management give sufficient regard to the fact that they were lending not shareholders’ funds (ie the Bank’s risk capital) but funds entrusted to them by depositors?
Even Dom Mintoff himself, when Prime Minister, admitted in Parliament at the time of the transfer to Mid-Med Bank of Barclays’ local banking operations that Barclays’ greatest legacy to Malta was the high standard of training given to its staff. I can quote the names of many people who came through the Barclays training mill and reached – some still hold - top positions both in Malta and abroad.
At the NBM, staff training, both in the Maltese Islands as well as overseas attachments was hardly existent. Happily, the situation was remedied by their successors the Bank of Valletta. They gave organised course and programmed on-the-job training the importance it deserved and have turned out some high calibre and well trained staff.
Financing industrial projects
But quite apart from the preparation of staff to do a good job, let me remind Mr Farrugia that even before he set foot in the Malta Development Corporation, Barclays had been financing a number of industrial projects straight from the enactment of the 1959 Aids to Industries Act. Of course, for confidentiality reasons, I am unable to reveal names but, to jog his memory, I will mention just two simply because both ended before the Malta courts and therefore became public knowledge.
These are Rambler Automobile Assembly Ltd. and Rigg Welts Ltd. Both these companies received substantial government grants and other assistance and were financed by hefty loans and overdrafts by Barclays on the strength of projections. These were prepared by management accountants, like Mr Farrugia, and the feasibility studies indicated viability of the projects although depending heavily on outside finance - classical cases of too high debt to (paid-up) capital ratios! With hindsight, at Barclays we placed too much reliance on these projections and, in the event, both projects proved to be white elephants which landed Barclays with large unrecoverable lendings that eventually had to be written off.
Of course, these were not the only industrial/touristic projects that were supported by Barclays. Had it not been for reasons of confidentiality, as the companies involved are still in operation, I would mention a string of these including one of Malta’s biggest ever private sector employer at the time whose financial controller was none other than Minister of Foreign Affairs and Investment Promotion John Dalli.
Jeans factory
This company ended up by having four factories (one of which in Gozo) employing hundreds of workers for many years. Only a drastic change in global demand for their particular product (casual wear mainly jeans) resulted in this American company eventually pulling out of Malta. It is then that I had the pleasure of getting to know Mr Dalli and to appreciate his outstanding financial and management skills which were already so evident. Indeed, it was no surprise when, later on, he was promoted to a senior management post with the same company at its European headquarters in Brussels.
On a personal level I myself have the satisfaction of having been very much involved in arranging all the company’s medium-term financing needs through Barclays Finance Corporation (Malta) Ltd. I was responsible for setting up the corporation in 1968 and was its first manager at a time when there was no other medium- and long-term finance provider in Malta, the commercial banks being restricted by Central Bank of Malta regulations to restrict – quite rightly I may add – their lendings to a repayment period not exceeding 5 years. Barfincor opened up a new scenario by offering terms of up to 10 years for commercial loans and up to 25 years for loans for house purchase by individuals.
Rubbishing Barclays
I now come to another important factor to disprove Mr Farrugia’s allegation. One of the reasons why Barclays had a lesser percentage than the NBM of the business of the many German-owned new industrial projects that were pouring into Malta from that country, mainly because of much lower production costs here, is the fact that certain MDC senior staff members were in the habit (I wonder why!) of rubbishing Barclays’ name and directing all such industrialists to the NBM and also to a particular Malta-based accounting firm. I will not say more as I am sure that Mr Farrugia as a former MDC high official knows what I mean. Even if he disputes what I say I will stick to my guns! I well remember what such industrialist said to me when I discreetly enquired why they had never sought banking facilities from Barclays in the first place.
Quite apart from what I have already said, I venture to say that facts speak for themselves. Mr Farrugia rather cheekily labled Barclays as having been akin to a glorified savings bank and that it made ‘riskless profits.’ I am really amazed at such a statement. the more so as Mr Farrugia was Governor of the CBM – albeit for a short while as he decided to make a quick exit – and so he was privy to the confidential statistical information that all local banks were obliged to submit monthly to the CBM which then published combined figures for all the commercial banks’ deposits; lendings etc.
Obviously, Barclays’ top management used to examine closely these statistics on publication. The duties of a member of my staff included an analysis of the combined figures after the simple exercise of deducting Barclays’ own figures from the totals thereby revealing the totals for its competitors! At the time these comprised only the NBM and, to a much lesser extent, BICAL. So Barclays was in a position to make a reasonably good calculation of how its deposits and lending ratios compared with those of the NBM.
I distinctly recall that whilst Barclays held some two thirds of Malta’s total commercial bank deposits, its total lendings – taking into account also those made through Barfincor, its 100 percent owned subsidiary – were not lower than the NMB’s and even touched the +60 percent level.
So much for Mr Farrugia’s statement which, to my mind, I consider to have been rather economical with the truth. I must say that I have always recognised his abilities as an economist; management accountant; financial adviser and even as an industrialist of sorts. However, especially when he was in positions of authority, I never shared his antagonism towards Barclays, admittedly a dominant foreign player in its days here with a strong influence on Malta’s economy, but not reluctant to play its part in assisting Malta’s industrial/touristic development.
I wonder what is at the back of Mr Frarrugia’s reasoning which, I see from the comments in his abovementioned weekly column as well as in that entitled ‘Ridiculous’ (MaltaToday 21 March), he wrote in the same vein regarding HSBC Bank Malta.
Finally, Mr Farrugia needs to be a bit more exact also in quoting facts to support his arguments. In the latter article he listed local bond issues which, he said, were ‘all in Maltese liri.’ He included the Mariner issue which, of course, was denominated in Euros and not in Maltese liri!
|
