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Controversy blocks publication of Bank of Valletta history - MaltaToday

Nationalisation of Maltese banks under Dom Mintoff - MaltaToday

 

 

 

News | Sunday, 29 March 2009

Matthew Vella

The controversy surrounding the forced nationalisation of the National Bank of Malta, precursor to the Bank of Valletta, still casts a shadow over the financial institution 30 years after the event – to the extent that a history of BOV, commissioned by the bank itself, has been withheld for publication.
Historian Henry Frendo was commissioned to write a 200-year history of the illustrious bank, from its inception as the ‘Anglo Maltese Bank’ in 1809 to the present, but the book but has not yet seen light of the day due to legal advice against its publication.
Frendo spent six years compiling the history of Malta’s banking development, with exclusive interviews with banking veterans who shed some crucial light on the goings-on behind the nationalisation of the National Bank in the 1970s.
According to former BOV chairman John C. Grech, the bank’s lawyers had advised the bank’s directors against publication since the book carried interviews with people still claiming compensation from the government for shares they held with the National Bank.
“The lawyers had advised us that since the claims were still sub judice, it would be incorrect to publish interviews with people who might have had an interest in making certain claims that would interfere with the ongoing court cases,” Grech said.
The National Bank of Malta was hit by a run on its reserves back in December 1972, but its original shareholders claim the Central Bank of Malta had refused to act as lender of last resort, and even blocked attempts by Barclays Bank to loan money to the NBM. In four days, the run on the bank saw enormous withdrawals totalling at least Lm2.5 million.
Around 350 shareholders lost their shares after they were forced to sign them over to the government, without compensation. Prime Minister Dom Mintoff had threatened in parliament that if the bank’s directors refused, he would remove the limited liability of the banks’ shareholders, extend it beyond the bank’s capital to their personal assets, and withdraw the four million pounds in parastatal funds which were deposited at the bank.
The case concerning the compensation to shareholders by government has been running since 1972 and so far has not yet been concluded.
But in 2005, informal discussions between Investments Minister Austin Gatt and the National Bank shareholders were held over an Lm8 million compensation package to the shareholders.

See History of the bank

 

Letters | Sunday, 22 March 2009 - link here

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.