In his article entitled “Rent seeking” (TMIS, 26 January), Alfred Mifsud states that “as a taxpayer, I continue to oppose any out of court settlement”. He is entitled to his opinion, which is not surprising as in July 2012 he had argued in this newspaper his objections to any compensation being given by government to ex-NBM shareholders after I myself had suggested a way out without any burden on the state’s income by way of taxes.
I too am a taxpayer but I am also conscious of the circumstances that led to the NBM’s downfall 40 years ago and which prompted the expropriation of the property of the then NBM shareholders. I will not repeat my own contentions in favour of an amicable settlement (TMIS, 22 July 2012).
However, since then there has been a significant development. The courts have pronounced themselves in a case instituted by a number of aggrieved shareholders. I quote just two important elements of the court judgment:-
1) The transfer of shares without payment by the former shareholders of NBM to the government violated their fundamental human right to enjoy property in terms of article 37 of the Malta Constitution.
2) Although at the time of transfers the share did not have much value, NBM had substantial assets in excess of its debts.
Both these declarations by the court clearly indicate that justice has finally been done to the shareholders. The case is due to be continued for the court to provide the plaintiffs adequate compensation. Mifsud had disagreed in July 2012 with my proposal for an out of court settlement whereby government would transfer to the ex-NBM shareholders, in full and final settlement of their claims, a mutually agreed number of shares in Bank of Valletta. I had indicated in my article the extent to which government had gained from its original Lm3 million (€7 million) investment in BOV. This, I now reckon, has risen to +€400 million including the current market value of €207 million of government’s 25.71% shareholding.
The government’s main argument (supported by Mifsud in 2012) was the fact that the NBM’s balance sheet as at 31.12.73 disclosed an excess of liabilities over assets of Lm253,000. It will be recalled that only one year previously, the NBM’s accounts showed a healthy surplus of Lm2,857,000. The 31.12.73 deficit arose from the creation of a provision for bad and doubtful debts which, events proved, was excessive. Indeed, after only nine months in operation, BOV turned a pre-tax profit of Lm686,000 and over a period of five years to 1978 managed to reduce the bank’s bad and doubtful debt provision by a net figure of Lm4,325,000! This calls to question the provision of Lm3,146,000 created in 1973 to produce a deficit of Lm253,000 in the NBM’s balance sheet and thus claim that the shares were worthless.
In my view, a very significant factor is that no element of goodwill was taken into account. I disagree completely with the view that the NBM had no goodwill value. Quite apart from the fact that the NBM group’s immovable property was taken at book rather than at its then market value, surely an established banking network had a value which was not reflected in the NBM’s balance sheet. By way of example, to establish a network of eight offices (i.e. much smaller than the NBM’s network), Banif Bank Malta returned a loss annually for its first five years of operations, having returned a small profit for the first time in 2012.
I maintain that there is a way for government to honourably eradicate this blot on Malta’s banking history through an out of court settlement and not prolong the injustice suffered by the ex-NBM shareholders and their successors by leaving the court to determine adequate compensation. This may well take a few more years thus rubbing salt into the wound.
Anthony R. Curmi
St Julian’s