The government on Monday filed two appeals against court judgments in which it was ordered to pay a total of €111,164,900 to shareholders of the National Bank of Malta which closed down in 1973.

In March, a court ruled that the heirs and shareholders of the defunct National Bank of Malta, the nationalised forebear of Bank of Valletta, are entitled to €111 million in compensation.

Mr Justice Joseph R. Micallef ruled in favour of two cases dealing with the same constitutional claim filed by two groups of NBM shareholders back in 1992, for the government to pay €44 million in compensation to 33 separate shareholding claimants, and €66 million to another group of 49.

In the appeals filed Monday, the government argued that the banking activity of the National Bank had been continued by another bank to avoid “an economic disaster” and the loss of deposits of the bank’s customers, as well as the loss of employment.

The government said that the court judgments adopted a negative approach and “imposed a punishment” on today’s public funds for having saved an economic disaster in 1973. The government argued that the National Bank had taken risks which were not sustainable and that 40% of its borrowing portfolio was not paid on time.

In 1972, the National Bank had also suffered a loss of capital and of bank deposits but, in 1973, the bank could not control the “heavy and intensive” withdrawal of money. If the government had not intervened using public money, the bank would have failed.

The shareholders were not ready to invest their money to recapitalise the bank, and neither were there the conditions for the Central Bank to act as a Lender of Last Resort. Such action could not stop a depositor run – conversely, if the Lender of a Last Resort action is offered, this normally leads to more customers withdrawing their money.

The government indicated that it was the owners of the National Bank that had invited it to take over the bank, and this was in their interest, the government statement said.

In the appeal, the government complained that the court relied on one expert and did not consider the work of a second expert, although the court had recognised the validity of her intervention. This expert had concluded that the National Bank shares in 1973 had no value and that the bank had been insolvent. If the bank had been left on its own it would have collapsed and brought about a disaster, the government said.

The government also submitted that the shareholders had filed their court case 18 years after the National Bank had closed and after putting their minds at rest following the government’s intervention. In the appeals, the government said the court should have turned down the requests by the plaintiffs as their action had been “abusive”.