The Malta Independent 27 September 2023, Wednesday
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Update: NSDF defends BOV share purchase saying it is of national importance and supports enterprise

Tuesday, 19 December 2017, 14:30 Last update: about 7 years ago

The National Development and Social Fund has said that its purchase of BOV shares to major projects of national importance; supports enterprise and business in improving its competitiveness, and is an initiative which benefits future generations.

This comes after the Opposition said the government’s decision to use money raised through the IIP programme to purchase shares in Bank of Valletta raises a number of questions which need to be clarified by the government.

In a statement, the NDSF said that “the overarching objective of the investment policy of the NDSF, as articulated by the Board of Governors, is the preservation of capital with real expected returns over the long term.

“This equity investment by the NDSF in Malta’s largest investment grade-rated institution was considered by the Board of Governors to yield a relatively high return to the Fund in the current market environment, which will in turn contribute to the Fund’s sustained long-term growth for the benefit of future generations.”

“The NDSF would like to state that on 1 December 2017 it had issued a Media Release to announce that it had acquired the Nil Paid Rights issued to UniCredit S.p.A. and that this investment was a long-term investment that would form part of NDSF’s long-term Directed Investment Portfolio, and will result in the Fund acquiring around 2.91% of BOV’s total shareholding.”

 “The NDSF reiterates that it is accepted practice for sovereign wealth funds to hold equity investments in the leading corporate entities of their own countries.”

“Furthermore the NDSF would like to clarify that, by virtue of the founding regulations, it is required to publish its audited accounts on an annual basis and shall report to the Minister responsible for Finance on its activities not less than once a year.

The same regulations provide that the Fund is subject to being audited by the Auditor General and that the audited accounts and the annual report of the Fund shall be laid on the table of the House of Representatives. The Fund is therefore committed to high standards of transparency and accountability. 

PN Statement

Earlier, in a statement issued by spokesman for finances Mario de Marco, the PN said that according to Legal Notice 2/2015, the funds collected from the IIP programme were to be used for twelve specific purposes. The twelve specified purposes range from helping stakeholders deliver social, employment and educational projects, to fostering initiatives that support better governance, and to initiatives for the improvement of health and care for the elderly. 

These twelve specific purposes do not allow for the purchase of shares by the government. By using funds collected from the IIP for the purchase of shares in BOV, the government went against the provisions of the above mentioned Legal notice. The matter is further compounded by the fact that the government has a vested interest in BOV, it being a significant shareholder in BOV and appoints its chairman.

The government defended its decision by stating that in terms of the Legal Notice it is “obliged to undertake initiatives for the benefit of future generations”. The purpose of such clause however was to allow the fund to be used to support and finance projects that have long-term goals, the PN said. The purchasing of shares falls beyond the definition of “undertaking initiatives for the benefit of future generations”. The government however used this clause to award itself unfettered powers to spend the IIP money as it so wishes and then justify its actions by stating that it “benefits future generations”.

The government kept this course of action hidden from the public eye. No public announcement was made by Government or BOV, the PN said. Yet again it is thanks to the media that the taxpayer found out about government’s action.

The Opposition is calling on the government to publish all the correspondence and documentation relevant to this expenditure including the cost benefit analysis that was done to ensure that this public money was spent in the best possible manner. If the government fails to publish this documentation then the Opposition will call on the Auditor General to investigate this expenditure.

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