The Malta Independent 11 July 2020, Saturday

Overdue compensation to National Bank of Malta shareholders (part 7)

Sunday, 7 July 2019, 10:51 Last update: about 2 years ago

Anthony R Curmi


In concluding this series of articles, I summarise the main points I have highlighted in support of my conviction that the National Bank of Malta (NBM) did not have a negative net asset value as at 31 December 1973 and therefore should not have been taken over, without fair compensation, by the government, through specific legislation rushed through by Parliament, setting up a Council of Administration (COA) in December 1973.


Barely three months later, all the assets and liabilities were passed on to the then 100 per cent government-owned Bank of Valletta (BOV).

It will be recalled that the Court of First Instance, as well as the Constitutional Court of Appeal (the latter nearly five years ago) decreed that value had passed from the shareholders without compensation for the benefit of the COA and, eventually, BOV. Thus, the latter obtained, at no cost, ownership of Malta’s second largest retail bank with 27 branches spread throughout Malta and Gozo. After taking over from the COA – again at no cost – BOV made a pre-tax profit of Lm1.1 million in its first nine months of operations to 31 December 1974.

Yet the foreign experts brought in by the government (to counteract the contentions in my affidavit submitted to the court in January 2015) maintained that the NBM was a failed bank because, they alleged, it was illiquid and insolvent. Ironically, their opinion was based on whatever documentation the Central Bank of Malta and the Malta Financial Services Authority (who, over the years, had given a number of direct orders to one of the experts) chose to pass on to them. I, on the other hand, as a Barclays Bank senior executive at its Malta Head Office, was in an ideal situation to keep my ears to the ground with regard to both what was going on in the banking sector (especially to assess the circumstances leading to the run on NBM) and also on the political front.

In my affidavit I gave reasons why I completely disagreed with the conclusions of the foreign experts – supporting my views by facts and figures – and I still contend that the run on the Bank came about in mysterious circumstances and could well have been stemmed by the then Finance Minister authorising the CBM to act as a ‘lender of last resort’ as provided by the Banking Act. There is written evidence in court that this was even suggested by Prime Minister Mintoff himself.

Since 1974 there have been changes in BOV’s shareholding, the main one being when – shortly after the change in the Bank’s name – the government sold 25 per cent of the equity to Banco di Sicilia (now Unicredit) for an undisclosed price but most likely at a profit. Shares were also sold to the public in 1995 but, throughout, the government retained directly a holding of 25.23 per cent (BOV’s audited financial statements as at 31 December 2018 show a reduced figure of 25 per cent) plus 0.48 per cent through Malta Government Investments. The obvious reason for this is the government’s wish to retain the right to appoint the Bank’s chairman.

My affidavit to the court included a schedule detailing what benefit the government derived from its shareholding. Based on figures obtained from BOV’s annual accounts up to 30 September 2014, I reckoned that, in 2015, this totalled not much less than €400 million (at inflation-adjusted values and after deducting the government’s initial capital injection for the equivalent of €7 million). This covers net dividends received, proceeds (assumed to be at par value without a premium) of share sales to Banco di Sicilia and to the public and the then market value of the government’s 25.71 per cent shareholding.

Taking into account the bonus share issue made last month, at the current market price, the value of the government’s net investment in BOV (excluding the further 2.88 per cent purchased more recently by the National Development and Social Fund) stands at around €147 million.

Thus, also bearing in mind the hundreds of million euros derived from the ‘sale of passports’ scheme, an eventual settlement of compensation by the government to NBM shareholders can possibly be made without burdening its annual budget and thus at no cost to the taxpayer. This notwithstanding, the government has shown no enthusiasm, through the Attorney General, to see the court decide on the amount of compensation. Yet, since 2013 the government has not held back from the largesse dished out (running into many millions of Euros) in increased emoluments to civil servants, the police force, teachers and others.

I conclude by reiterating my view that, to be fair, compensation should be based on the current value, on an inflation-adjusted basis, of a realistic re-assessment of NBM’s true equity value in December 1973. As explained in my previous articles and in my affidavit to the court (supported by figures in five appendices) I contend that this re-assessment should take into account the following:

1. Unrealistic increase in Bad & Doubtful Debt provisions.

2. Uplift in value of NBM’s immovable property to 1973 values.

3. Goodwill value in 1973.

4. Unnecessary loss on premature sale of gilt-edged investments.

Arriving at a 1973 Maltese lira value of the above-mentioned factors, and taking into account inflation since then, I calculated in my January 2015 affidavit the overall cost to NBM shareholders of being deprived of their shareholding without adequate compensation. The figure indicated by me bears no relation to the ludicrous out-of-court offer of €18.6 million (quickly reduced to €16.3 million) made by government before the 2014 decision (favourable to the shareholders) of the Constitutional Court of Appeal (Civil cases). 

The government’s intransigence in appealing to Malta’s highest court instead of concluding a fair out-of-court settlement may well prove to be a very costly one. In the interests of the long-suffering NBM shareholders, it is hoped that this saga will not drag on but soon be brought to a fair conclusion. Only then will this major blot on Malta’s banking history be erased.


God forbid that the shareholders will have to endure a worst possible scenario: that a court decision on the compensation amount is not taken before the presiding judge’s retirement in March 2021. Were that to happen, whoever inherits this case would be faced with the formidable task of tackling the voluminous documentation that has piled up in court over so many years.



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