The Malta Independent 24 February 2020, Monday

Reply to false statements on the National Bank of Malta

Sunday, 22 September 2019, 09:31 Last update: about 5 months ago

Piero Ugolini and Richard Nun

The following is in reply to the article written by Anthony Curmi in The Malta Independent on Sunday of 8 September 2019 in respect of the failure of the National Bank of Malta

We refer to the latest article from Mr Anthony R. Curmi in his efforts to require Maltese taxpayers to pay compensation to former shareholders of the National Bank of Malta (NBM). Such an outcome would put Malta at odds with all banking supervisors in Europe and the Bank Recovery and Resolution Directive (BRRD) where shareholders, and, in turn, bond holders and uninsured depositors, are expected to bear the burden of failed banks rather than innocent taxpayers.

Mr Curmi is not the only person who was in the thick of things during the events of late 1973 and early 1974 following a depositors' run on the NBM. Evidence under oath was given in court by Mr Alfred Mifsud explaining the horror expressed by Barclays Bank colleagues who had been sent to straighten out the NBM.

They found that the NBM had given credit exposures without any credit assessment and a complete lack of justification on file. The Deloitte audit report lists pages of examples of poor management and lack of accountability of NBM managers for loan disbursements and recovery.  Mr Mifsud worked closely with Mr Curmi at Barclay's Bank and their colleagues at the time, and he could not recall anyone expressing the view that the Government takeover without compensation was abusive; in fact it was quite the contrary. In his testimony, Mr Mifsud said there was consensus at the time, even by Mr Curmi, that the Government did what was necessary to save the depositors and the economy from the terrible consequences, had the NBM been allowed to collapse totally under the weight of its bad debts. It is important to recall that no deposit insurance existed at that time, so the loss would have been borne only by the depositors.

Contrary to what Mr Curmi says we, as foreign experts, collectively have considerably more international expertise in bank failures than Mr Curmi, and we were not involved in the case until after the lower Court and the Constitutional Court had given their initial decisions that some unquantified compensation may be due. Therefore, Mr Curmi's assertion that the Court was not impressed by our evidence is completely false. This kind of technical input by a team of international experts was not on the record of the case prior to 2014.  

If at any time the Government had offered any out-of-court compensation, it was only political expedience resulting from voters' sensitivities. We have never advised the Government to seek any out-of-court settlement - in fact, quite the contrary: we advised that the case should be taken to the relevant European Courts if the Maltese Courts ever put any burden on Maltese taxpayers in their judgement award.

Given his age and experience, Mr Curmi should know that judging past events through the prism of the nearly 50 years' passage of time can well lead to faulty conclusions. What carries weight are the facts and documents proving events as they happened at the time and the conclusions of experts at the time, including Central Bank inspectors, Deloitte auditors and the Court, all of whom reached the same conclusion: that the shares had no commercial value and no compensation for their transfer was due. We were told that, among the witnesses heard by the Court at the time and helping the Court to reach such a decision, were banking experts respected by everyone, including Mr Curmi.

As experts, we were engaged to conduct a review of the evidence and, based on the facts, to give an opinion as to whether the shares of NBM had any value and therefore whether any compensation was due. No number was ever fixed by the Court but recent cases in the EU have indicated that even one Euro is the compensation for a bank failure (Santander/Banco Popular in 2017- Barings for 1 pound).

Finally, it is critical to recognise that, as a financial centre, Malta cannot afford to set a unique and seriously flawed precedent of compensating shareholders for a failure due to the bad management of their investments.


Piero Ugolini is a former Assistant Director of the International Monetary Fund and Richard Nun is a former Deputy Director of the Texas Banking Department.

Both are currently independent experts.

  • don't miss