The National Bank of Malta and the Rule of Law

If justice delayed is justice denied'... what would justice become if delayed for over 35 years?

Unlikely though the prospect may sound in an EU Member State in the 21st century, this is indeed the case with at least one long-standing issue currently before the law courts.

Last month, a court case originally instituted by the shareholders of the National Bank of Malta in distant 1977 found itself once again deferred for final judgement, this time until 27 September.

The plaintiffs are effectively demanding justice over what they claim was a forced take-over of the bank in 1973: when the fledgling Labour administration, under prime minister Dom Mintoff, decided to nationalise the bank 'in the country's interests'.

What followed next depends entirely on whose version one believes. Shareholders and their dependants claim to have been subjected to a harrowing ordeal: some made to sign away their shares under duress; others resisting pressure to do likewise, but still proving powerless to prevent various government manoeuvres - including what they describe as an artificially-induced run on the bank - from wresting the NBM from their ownership.

But while the local justice system has traditionally been more concerned with continually postponing a final decision (still less a settlement) on this issue, the case remains wide open in the court of public opinion.

This month it fell to one of the main protagonists - Lino Spiteri, who was head of the Central Bank's research unit at the time in question, and would later become Finance Minister - to give the former Labour government's version of events.

Prompted by the recent documentary 'Dear Dom' - which featured interviews with surviving shareholders almost exactly 40 years after the transfer of ownership in December 1973 - Spiteri challenged some of the main grievances of the National Bank plaintiffs, who have always contended that the bank's liquidity had been deliberately weakened by government through a number of legal measures aimed (among others) at making it impossible for other banks to provide surety.

Spiteri insisted that, in his capacity with the Central Bank, he had been privy to the reports on the financial state of the NBM - a major lender at the time to Malta's then emerging manufacturing, construction and tourism industries.

"The conclusions were worrying," Spiteri said of reports he submitted to the inspection unit at the Central Bank. "So much so that the Central Bank drew the attention of the minister of finance to them."

Spiteri described Mintoff, whom NBM shareholders insist aggravated the run by alarming depositors during a televised address, as having been "worried by the run and its impact on the business community".

He also justified the Central Bank's refusal to offer assistance by observing that prime minister Mintoff did not feel that the Central Bank  "should risk own funds by acting as lender of the last resort unless there was adequate security."

The reaction was immediate: Jeremy Cassar Torregiani - grandson of the late Anthony Cassar Torregiani, NBM's founder and former chairman - rebutted in a letter to the press that "for Lino Spiteri to imply that the National Bank was being run badly, or that it was experiencing an internal crisis is a lie that cannot under any circumstances be allowed to prevail."

On the contrary, Cassar Torregiani insists the bank was not only liquid at the time, but had just registered unprecedented profits and was more than able to withstand the pressures of the bank-run of 1973.

"Any business that is experiencing record-breaking results cannot possibly be rendered as failing due to the sole interpretation of an 'inspectors report'," he argued.

"The truth... is that the law at the time obliged the Central Bank to perform and by refusing to do so, it betrayed the whole banking system and tossed this very profitable enterprise into the hands of government. Of course, most people would not know these details and are not familiar with how banks work. They do not understand that in creating money, a bank relies on the fact that people will not all call in on their deposits at the exact same time and that Central Banks around the world were set up to offer an otherwise notoriously fragile system this necessary security."

In the coming weeks, MaltaToday will revisit the sequence of events leading to the demise of the National Bank of Malta: a sequence that sheds invaluable light on the difficult birth of the Maltese Republic, exactly a year after its takeover on December 13, 1974; and which, four decades later, continues to cast a long shadow over Malta's political conscience.