The Malta Independent 3 March 2024, Sunday
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Court finds in favour of National Bank shareholders

Malta Independent Thursday, 9 January 2014, 13:32 Last update: about 11 years ago

A court presided by Judge JR Micallef found that National Bank of Malta shareholders had their human rights breached when the Labour government led by former Prime Minister Dom Mintoff in 1973 had forced them to hand over their shares after the bank faced a run on deposits.

The shareholders can now sue for damages.

The government had gone on to replace the National Bank with Bank of Valletta.

Shareholders argued that the run had been engineered specifically to weaken the bank and provide the government with an excuse to nationalise it in the public interest.

The National Bank scandal

(An extract taken from John G Dacoutros’ book Ships, Wine and Wars)  

In December 1973 the board directors of the National Bank of Malta Group, which was a privately-owned commercial bank, faced a calamity coming directly from the Prime Minister Dom Mintoff’s office. This proved the death of many private investors on the island whose business interests were seized by Dom Mintoff, the Labour party leader and Prime Minister of Malta, at a time when Malta was passing through an economic boom in industry.

Premier Dom Mintoff, by his scandalous actions, wiped out a whole generation of banking history by forcefully taking over the business of the banks, and assuming its business and assets with no compensation to its 274 shareholders. The National and Tagliaferro Banks Act 1973 was passed hurriedly through parliament. On the dark day 22nd March 1974, the Bank of Valletta hurriedly took over business with Lm43 million in assets, 27 branches and after nine months made a miraculous Lm1 million in profit.

On Thursday 6th December 1973, a number of National Bank of Malta branches reported heavy withdrawals amounting to hundreds of thousands of Maltese lira, fuelled by Mintoff sympathisers. The National Bank of Malta Group faced a run on the bank. The government’s Central Bank refused to act as a lender of last resort, and blocked Barclays Bank and other banks from supporting the National Bank of Malta Group.

The General Manager Henry Micallef and his assistant manager Antoine Tagliaferro were called in for a meeting at the Central Bank with assistant governor Lino Spiteri who was also Minister of Finance between 1996 and 1997, to assess the bank’s situation. Micallef said the bank had enough liquidity to meet a heavy demand. The next day, as the withdrawals continued, the NBOM directors – chairman Louis Vella, board secretary Dr Robert Staines, Henry Micallef and Antoine Tagliaferro – were called again for a meeting with Prime Minister Dom Mintoff.

On Monday 10th December 1973, Lm500,000 were withdrawn. A board meeting of the NBOM was called, and it was assured that the bank still had 30% liquid assets out of its total deposits. The minimum required by law was 25%.

At 3pm that day, Louis Vella, Henry Micallef, Antoine Tagliaferro, Major Austin Cassar Torreggiani and Baron Patrick Scicluna, son of John Scicluna, known as Ic-Cisk, were called in to a meeting with Premier Dom Mintoff, who was flanked by Finance Minister Guze Abela, Central Bank Governor RJA Earland, Lino Spiteri and the Attorney General Dr Edgar Mizzi.

Mintoff laid down his cards clearly – he wanted the bank by 5.30pm that day. He demanded that the shares be transferred to the government, threatening he would close the bank and declare a Bank Holiday. Mintoff claimed the solution to stop the run on the banks would be to have the government take the banks in its hands in order to restore depositors’ confidence. At the time, there were press reports that both Barclays Bank and Midland Bank were ready to further support the National Bank of Malta. These actions had been stopped by the Central Bank as Mintoff simply took over the banks. Among the 274 shareholders, Peter (Dacoutros) and his brothers George and Anton lost 1.2% of all the shares of the National Bank of Malta. On the dark day of the 27th March 1974 the Bank of Valletta took over business with Lm43 million in assets and 27 branches, and after nine months made a miraculous Lm1 million in profits.

George’s young son Peter recalled the story as follows: “Two policemen in uniform turned up at the door of my uncle’s residence in East Street, Valletta, and rang the doorbell at 10.40pm. My uncle went downstairs in his pyjamas and opened the door accompanied by his two terrified spinster sisters who lived with him. The three of them were in their late 70s at the time.

“One of the two policemen handed a document to my uncle and requested him to sign it. My uncle asked what the paper was all about and in return the policeman told him it was a document whereby he would be signing off his shares in the National Bank of Malta. My uncle had a quick look at the document and then told the policemen that as his brother, who happened to be my father, was a lawyer, he would consult with him immediately and the following morning he would go to the bank’s head office and see to the matter.

“One of the policemen told my uncle: ‘Jekk inti ma tiffirmax dik il-karta issa, ghada filghodu ma jkollokx ghalfejn tmur il-fabbrika ghaliex ma tkunx tieghek izjed’. (If you do not sign that document now, tomorrow morning you will have no reason to go to your factory as it will not be yours anymore). My uncle Peter signed the document. Yes, signed under duress or as we commonly say, at gunpoint!

“Nobody in his right frame of mind would sign off his wealth unless he was forced to do so. I was a 22-year-old man at the time. These facts are as clear in my mind as they were on the night it happened. Yes, because these facts are undeniable truth. These facts I recounted in court when I was asked to give testimony on 28 October 2010. A distortion of these facts by anybody directly or indirectly involved in engineering the takeover of the National Bank of Malta would be acting like the proverbial ‘throwing the stone and then hiding his hand’. It would be a devious mind acting out of shame and guilt for one’s wrongdoing. Where there is guilt there is crime.”

Malcolm Naudi in his book ‘Randon Recollections and Memoirs’ of the late Anthony Miceli Farrugia states: “It was not easy to take over the bank. Mr Mintoff had to have a majority shareholding. He sent people around to Francia, for example, to sign, and to other people, but he did not send anyone to Marquis Scicluna, who was then the majority shareholder. Mr Mintoff threatened the shareholders that he would remove their limited liability, making each one personally responsible through all their assets for all the bank’s debt.

“On the night of 12th December 1973, at about 2am, two policemen on motorcycles came to my house in Ta’ Xbiex. My daughter Helen, who opened the door to them, was frightened. She thought they came to arrest me. They gave me a letter from the Finance Minister stating that, under the Banking Act, he was suspending the banking licence of the National Bank of Malta. He nominated Lino Spiteri as the administrator entrusted with safeguarding the bank’s liquid assets in the interest of the bank’s depositors, creditors and shareholders. Dr Abela did not exclude any other action that the government may have had to take under the Banking Act.”

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