The MFSA has told The Malta Independent, in response to questions regarding a statement made by PN MP Jason Azzopardi regarding payments by the Central Bank to Pilatus Bank creditors, that the payments were made using Pilatus Bank funds held at the Central Bank for “basic operational and day-to-day requirements”.

On Wednesday, Azzopardi said in a Facebook post that since last Maundy Thursday, the Central Bank of Malta (CBM) “has been paying by online direct credit the creditors of Pilatus Bank. In April alone, more than €129,000 were paid by the CBM to these creditors. Why is it only Sandro Demarco, the scarlet red Deputy Governor, who is dealing with this? Why all the secrecy? Did OPM exert pressure? Why did the CBM not issue any public announcement? If this is normal good governance, why hasn’t the CBM gone public about it?”

PN MEP David Casa has sent a letter to the Chairperson of the Supervisory Board of the European Central Bank, in which he made her aware of the latest revelations, and asked the European Central Bank to investigate.

On March 20, Ali Sadr was arrested in the USA and charged with circumventing US sanctions on Iran, money laundering, fraud and more. He pleaded not guilty but was denied bail. Ali Sadr was the chairman of Pilatus Bank, however upon the news of his arrest the MFSA took over the bank and had him forcibly removed as chairman.  The MFSA had appointed Lawrence Connell to take charge of all the assets of Pilatus Bank Limited. In a statement MFSA had said that Connell will be in charge of any assets related to the investment services business of the,  assume control of the Bank's banking and investment services business and to continue carrying on that business until such time as the MFSA may direct.

This newsroom asked the MFSA whether it could confirm Azzopardi’s statements, to the effect that that the Central Bank had made €120,000 in payments to creditors of Pilatus Bank, to explain the basis for the MFSA granting approval of these payments, and whether payments were made at the time alleged due to insecurity surrounding the banker’s arrest.

In response, the MFSA said, “Payments have been effected by Pilatus Bank in relation to basic operational and day to day requirements including salaries of employees. All payments have been made on instructions of the competent person appointed by the MFSA (following the March 2018 regulatory sanctions imposed by the MFSA on Pilatus Bank) and processed by the Central Bank of Malta using Pilatus Bank funds held with the Central Bank.”

A financial expert asked by this newsroom to confirm whether such a response by the MFSA did indeed include payments to creditors, the expert said that costs may include salaries as privileged creditors, dues to government such as social security and FSS payments, and possibly the administrators fee: “If they are also paying mundane expenses everything depends on how the reserve deposit account should be administered”.

This newsroom had also sent questions to the Finance Ministry, which chose to pass the buck rather than respond to questions. This newsroom had asked the ministry the following questions: Why did the Central Bank pay Pilatus Bank Creditors? How much was paid out to the creditors? On whose orders were the payments made? Who made the request for payments? Who were the recipients of the payments?

The ministry however, answered: “One should address this question to the Competent Person at Pilatus Bank.” Following this response, this newsroom pressed the ministry stating that it was pertinent for the public to receive a response on some of the above questions, to which the ministry said: “Details of such banking transactions may be requested by regulatory and supervisory authorities only.”

The Central Bank had previously reacted to Azzopardi’s Facebook post, by saying : “The Central Bank would like to clarify that, in line with its basic function of acting as banker to the banks, all credit institutions licensed by the MFSA, including the one referred to in the said article, are obliged at law to operate a reserve deposit account with the Central Bank of Malta. With reference to the specific credit institution referred to in the said article, following the appointment on 22 March 2018 by the MFSA of a competent person in terms of Article 29(1)(c) of the Banking Act and Article 15A(1)(b) and (c) of the Investment Services Act, and following consultation with the MFSA, each transaction undertaken by the said credit institution through its account held at the Central Bank is conducted with the explicit approval of the said competent person. This is in line with the administrative measures implemented by the MFSA, and therefore, there was no new measure taken by the Central Bank that needed to be communicated to the public. Such transactions by this credit institution, like all transactions by all licensed credit institutions, are effected by the staff of the Central Bank’s Payments and Banking Department.”

“The Central Bank of Malta categorically denies that the Office of the Prime Minister exerted any kind of pressure on the Central Bank of Malta on any matter.”