Letters | Sunday, 22 March 2009

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Nationalisation of Maltese banks under Dom Mintoff

I beg to differ on a number of statements made by Raymond Sammut in his letter of 1 March. He certainly makes every effort to portray his idol as a genius and saviour of Malta. Who of us who lived in that era can forget ‘Mintoff, Is-Salvatur’?
Comparing the nationalisation of banks in the current world financial crisis with the takeover of the National Bank of Malta is like comparing cheese to chalk. Mintoff did not officially nationalise the National Bank. No, instead he used threats and coerced shareholders to sign over their shares to the government. He intimidated shareholders in such a way that he left them very little choice but to capitulate. Had shareholders not signed over their shares, Mintoff would have carried out his threat to withdraw parastatal funds from the NBM, which would certainly have meant the closure of the bank. The NBM shareholders did not want to put depositors at risk, nor were they willing to test Mintoff’s threats to remove the Bank’s limited liability.
Indeed, Mintoff did not allow the Central Bank to act as the banker of last resort, nor did he allow the NBM Directors to get assistance from a British bank (which would have been forthcoming). Mr Sammut’s impression that Mintoff was correct in not allowing this to happen because it was not his money he was gambling with, is misguided. If the NBM was allowed to take the action it had wanted (and had a right) to take, and if Mintoff had not scaremongered as he did with his statements in Parliament, the crisis would have been solved with a lot less heartache and hardships for many shareholders. The Central Bank, had it been allowed to act as it should have, could then have imposed its own board of directors and management for an interim period if it so desired. Mintoff, as was his want, choose confrontation and an iron fist!
Mr Sammut mentions that the late Louis Galea, chief executive of Barclays Malta, and the late Judge J.H. Xuereb both agreed with Attorney General Edgar Mizzi that the value of NBM shares was nil at the time of takeover. Yes, and so did auditors Deloitte, who Mr Sammut refers to as ‘the well renowned firm’ and ‘not the home-bred auditors with local political passions’ – (if anyone has shown local political passions, it is Mr Sammut. His writings do nothing to hide his blinding passion for the ingenious Dom Mintoff).
Deloitte & Company had made their certification on the basis of what was fed to them by the Council of Administration, which was put in place by none other than Mr Mintoff. The Council of Administration highly exaggerated the provision for bad and doubtful debts and at the same time undervalued the bank’s assets. A little creative accounting can go a long way! The late Louis Galea, Judge J.H. Xuereb and Deloittes & Company made their judgement on the accounts that they were shown and did not go into how the accounts were arrived at.
As I mentioned above, the NBM’s assets were undervalued in the audited accounts. Properties owned by the NBM included the head office in Kingsway (now Republic Street) Valletta, the Sliema branches at Tagliaferro Centre and the Strand, the Marsa branches at Bridge Wharf and Cross Roads and the Gozo Branch at It-Tokk in Victoria. Their real value was considerably higher than the mere Lm295, 000 value given by the Council of Administration for the audited accounts.
The provision for bad debts was exaggerated – this is a fact as a very high percentage provided for were recovered. Incidentally, once Bank of Valletta recouped this money which ran into millions of Malta Liri, it should have been given to the NBM shareholders and not distributed as dividends and shares to BOV shareholders. To help reduce further the value of the National Bank of Malta shares, the Council of Administration also included a general provision for property loans and other advances for the amount of some Lm1,097,000. Apart from the Bank’s own properties, the Council of Administration also devalued the prices of properties which the NBM held as security against loans. Yes, Dom Mintoff had ingenious ways.
The National Bank of Malta had made a taxable profit of Lm592,000 up to December 1973. Not bad for a bank supposedly worth nothing. Nobody in their right mind would have signed away their shares for nil value. No, they did so because they were coerced and threatened, with among other things the calling in of business loans.

Victoria Grech
Sliema

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