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6 maltatoday | SUNDAY • 31 MARCH 2024 NEWS JUSTICE delayed is justice de- nied. Hackneyed as a perennial truism, this motto unofficially adopted by the heirs of the Na- tional Bank of Malta's share- holders is still fitting well over 40 years since the takeover of a private bank out of whose ashes came the Bank of Valletta. In a court this week, it was fi- nally declared that well over 80 separate groups will be entitled to €111 million from the State as compensation for the shares their forebears had to sign off back in 1973 to the Labour ad- ministration at the time. It is a bittersweet victory: so many passed away with no hope of seeing the endless roulette of court cases ever coming to an end, while having witnessed the flourishing of Malta's small eco- nomic miracle, assisted by the role of Bank of Valletta. Much of Maltese history tends to be coloured by party hues, yet the NBM saga is the one in which the 'caudillo' socialist Dom Mintoff is pitted against an old class of nobility and pri- vate bankers. It was a run on the bank in the first week of December 1973, that prompted the start of a government take- over of the private bank, with shareholders left without a cent for the share transfer. On one hand, this singular event proved to be one of the building blocks of Malta's modern economy – a state-owned bank extending interventionist credit for a new industrial base. On the other, a tale of justice denied, reaching its apex only last week. No compensation for share transfer It was the first week of De- cember 1973, when Prime Min- ister Dom Mintoff delivered a televised address to the nation in which he expressed his 'con- cern' at the apparent precari- ousness of the banking sector. It had been a year since crisis had hit another private bank – BICAL – and a trickle of depos- itors had already started with- drawing substantial amounts from a number of NBM branch- es. Mintoff's address intensified the run. The late Lino Spiteri, then a Central Bank assistant gover- nor, was by Mintoff's side dur- ing that address. His is a dif- ferent view from other critics', as recounted in L-Elf Lewn ta' Mintoff (2014): "Mintoff got it in his head that he could stop the run on the bank by going on TV… I had to be by his side as he speaks. I did agree that, with his words, he could calm down the situation." On 6 December 1973, the management of the NBM was called in for a meeting with Lino Spiteri to assess the situ- ation: the NBM then held over Lm39 million in client depos- its and Lm3 million in deposits from other banks, facilities that were in excess of the Banking Act's mandatory 25% of paid-up share capital. Even as the run intensified by 10 December – with Lm900,000 withdrawn in one day – the bank's assets still totalled 30%. But it was on this day that Dom Mintoff personally summoned the NBM's senior management, together with finance minister Guze Abela, Central Bank gov- ernor RJA Earland, Spiteri and Attorney General Edgar Mizzi. An ultimatum: hand over the shares, "naturally without com- pensation", or face the prospect of extending shareholders' lia- bility to their personal assets. The bank's owners were ef- fectively forced to capitulate to the administration of the time, when the Central Bank of Malta refused to extend liquidity from the bank's own reserves of Lm8 million, to cover the run. They were made to sign off their shares, without compensation, before other banks like Barclays or Midlands could step in to ex- tend finance. Spiteri insisted that the Cen- tral Bank's quarterly data and inspections of the NBM clearly showed that the bank was un- der stress. "It was weakening. The bank had loaned out more cash than it had deposits. The finance minister reported the matter to the Prime Minister. The public started perceiving the problem and the run on the bank started… and the bank did not have the liquidity to pay out all these deposits." Mintoff believed a private shareholders' bank should not be bailed out by the Central Bank, Spiteri added, trashing assertions made in the film Dear Dom that government repre- sentatives were sent knocking on shareholders' doors to sign off their shares to the State. "It was banking union members who urged to have the shares transferred, in a bid to safeguard their jobs… the government had nothing to do with the run on the bank, and it was the NBM's management that came asking the government for help." No lender of last resort An administrative council was set up to take over both the Na- tional and Tagliaferro banks (Tagliaferro was one of several smaller banks that had merged into the NBM). Economist Al- fred Mifsud, then a former Cen- tral Bank employee, had written back in 2012 in a personal blog justifying Mintoff's belief that the Central Bank should not act as a lender of last resort for the NBM. It remains a major bone of contention on whether there was a deliberate tactic to lay waste to the NBM before na- tionalisation: first allowing for a run on the bank's reserves, and then denying it a lifeline. "Whether NBM was simply il- liquid or insolvent at the time will always remain a subjec- tive judgement… (Mintoff) did not feel that the Central Bank should risk its own funds by act- ing as lender of the last resort, unless there was adequate secu- rity," Mifsud had said. The NBM did ask for help from the Central Bank to with- stand the run of December 1973 through a temporary advance facility, offering up its proper- ty and part of its loan portfolio with leading Maltese enterpris- es at the time, as collateral. Both Mifsud and former Labour min- ister Lino Spiteri have argued that the Central Bank was dis- inclined to risk taxpayers' mon- ey, having been dissatisfied with the loan security. Mintoff could have, at the time, taken the alternative course of instituting Malta's first State-owned bank without cannibalising the ailing NBM. Critics of the strongman will agree he preferred seeing Mal- ta's nobility stripped from its power of retail banking and hold on a delicate island-state economy that now had to be planned by the government. Certainly enough, there was also little to no resistance from the Borg Olivier Opposition at the time, with the House voting to first declare the bank insol- vent before actually quantifying its equity value. The law came into force on Thursday 13 De- cember 1973, with the NBM formally passed into the hands of the Maltese State. Devaluing the NBM's collateral Apart from Central Bank re- fusing to extend the NBM a lifeline, the picture of its liquid- ity was compounded by the 1974 annual figures issued by BOV: its loan book with major Maltese companies had been revalued, to make it look as if the debts incurred by the NBM A story as old as modern Malta: In yet another piece of the National Bank of Malta puzzle, a court order for compensation serves to once again revisit the nature of the bank's nationalisation in 1973: MATTHEW VELLA explores the contentious story of Labour's economic strategy in a world far different than today's