Government appeals €111m National Bank ruling, says shares were worthless
The government has appealed court sentences, ordering it to pay the shareholders of the defunct National Bank of Malta a total of nearly €111 million.
The bank closed down in 1973 and Bank of Valletta was set up instead by the government.
The court earlier this month ordered the payment to the shareholders after finding that they were deprived of their shares without compensation in breach of their fundamental rights.
The government is arguing in court documents filed yesterday that its intervention to save the National Bank’s banking activity by setting up another bank to handle it was needed to avert an economic disaster, the loss of depositors’ funds and jobs.
The government said that while the courts had recognised this need, the court’s sentences still adopted a “negative vision” and imposed a penalty on current public finances for having averted an economic disaster in 1973, as if what had been done was wrong and should not have been done.
“The government declares once more that the National Bank had been taking risks it could not handle and 40% of its loans portfolio could not be paid on time.”
It said that in 1972 the National Bank had already seen a loss of capital and deposits and in 1973 it could not control a run. Had the government not intervened using public funds, the bank would have collapsed.
The shareholders had not been ready to invest their own funds to recapitalise the bank and the conditions were not in place for the Central Bank to act as a ‘lender of last resort’, which, in any case, could not stop a deposit run. If anything, that would have made the run even worse.
It was the owners of the National Bank themselves who had invited the government to take over the bank, since that was also in their interests, ensuring they did not lose their own deposits and facilities in the bank, the government said. It complained in the appeal documents that the court had relied solely on one expert and had not considered the work of another expert, despite acknowledging her ‘valid work’.
That expert had concluded that the National Bank shares in 1973 were worthless and the bank was insolvent.
“Had the bank been left on its own in 1973, it would have collapsed and created a disaster,” the government insisted.
It also pointed out that the shareholders had instituted their court cases 18 years after the event, after making sure that their bank facilities were safe, thanks to the government.
The court could, therefore, have dismissed the cases since their purpose was abusive.
The two cases, filed in 1992 by a total of 82 original applicants, revolved around the saga that kicked off in December 1973 when then prime minister Dom Mintoff updated parliament about the situation of the National Bank of Malta.
He also spoke about plans to take over the bank, explaining that that way forward had been suggested by a representative
of the same bank. A week later, on December 12, 1973, the administration of the National Bank and the Tagliaferro Bank was “temporarily” taken over by an administrative council.
In March 1974, the assets and debts of NBM were transferred to Bank of Valletta Limited by public deed published by notary Maurice Gambin.
All 82 applicants were among those shareholders who opted not to sign an agreement to transfer their shares to the government without payment.
“The bank had been taking risks it could not handle