THE CENTRAL BANK OF MALTA
Following independence in 1964, the Maltese Government sought to establish a central bank. This was first recommended in January 1964 by a UN mission headed by Professor Wolfgang F. Stolper on the grounds that there were serious gaps in Malta’s financial infrastructure, particularly concerning advice to the Government on financial and monetary matters.
In response to this recommendation, the Maltese Government sought technical assistance from the Bank of England and the International Monetary Fund to obtain advice on the establishment of a central bank. In February 1967 a senior official of the Bank of England, Dr Philip L. Hogg, arrived in Malta to carry out preliminary organisational and legislative work. Legislation was enacted on 11 November 1967 and five months later, on 17 April 1968, the Central Bank of Malta was formally established. Dr Hogg became the first Governor of the Bank.
The Bank’s operational history until 2008 can be subdivided approximately into three main periods, which reflect the Bank’s evolution over the years from an organization carrying out central banking functions in the context of Malta’s fixed exchange rate regime to an institution which forms an integral part of the Eurosystem, which sets and implements monetary policy in the countries of the euro area.
1968 – 1994
During this period the Central Bank of Malta focused mainly on the implementation of exchange rate policy, the management of the country’s reserves, the supervision of the banking system, the issue of currency and the provision of banking services to the government, public sector organisations and the banks.
The Bank’s role in implementing exchange rate policy assumed particular significance in July 1972 when the Maltese currency peg to sterling was discontinued and the Bank began determining the exchange rate of the Maltese lira (then the Malta pound) on the basis of a trade-weighted basket of currencies. Exchange rate policy at the time involved the imposition of exchange controls. Following the enactment of the Exchange Control Act in 1972, the Bank was appointed as the agent for the administration of exchange controls – a role which it continued to exercise for a number of years. The Bank was also responsible for the management of the country’s external reserves and was the sole buyer and supplier of foreign currency to the public sector and the banks.
The Central Bank of Malta was also appointed as the supervisor of the banking system in terms of the Banking Act of 1970 and, later, as the supervisor of the Malta Stock Exchange in terms of the Malta Stock Exchange Act, 1990.
In September 1969 the Central Bank of Malta issued its first series of currency notes and, following decimalization in May 1972, its first series of coins. The Bank was also responsible for monitoring the Maltese government’s cash position and for providing it with short-term credit.
1994 – 2002
This period was marked by a notable change in the Bank’s policy orientation as part of an overall modernisation of the financial services sector, which was reflected in the introduction of new legislation and an extensive revision to the existent laws. Following the enactment of amendments to the Central Bank of Malta Act in 1994, the Bank was granted greater autonomy for the formulation and implementation of monetary policy. A Monetary Policy Council was set up and the Bank launched its first open market operations with a view to shifting from a system of direct monetary controls and administered interest rates to a more market-oriented intervention and market-driven interest rates. The Bank was also prohibited from advancing short-term funds to the government in order to strengthen the effectiveness of monetary policy.
To encourage the development of an inter-bank foreign exchange market, the Bank limited its foreign exchange deals with the banks to three currencies. Furthermore, all exchange restrictions on current account payments were gradually removed.
Following the enactment of a new Banking Act and a Financial Institutions Act in 1994, the Bank’s responsibility for banking supervision was confirmed after it was appointed as the Competent Authority responsible for the supervision of credit and financial institutions.
2002 – 2007
Malta’s preparations for membership in the European Union (EU) meant that the Bank had to adapt itself to a new environment in line with the country’s new commitments. In 2002 the Central Bank of Malta Act was amended to grant the Bank full independence in the formulation and implementation of monetary policy. The amendments also ensured the security of tenure of the Governor, Deputy Governor and Board members of the Bank by stipulating five year terms of office. Monetary policy decisions were vested in the Governor, following consultations with the Monetary Policy Advisory Council. The amendments also provided for the setting up of a framework to govern payment systems concurrently with the setting up by the Bank of the first formal payment system in Malta compliant with international standards. In the same year responsibility for the regulation and supervision of the banking and financial sector as well as of the Malta Stock Exchange, was transferred to the MFSA. The Bank remained responsible for ensuring the stability of the Maltese financial system.
On 1 May 2004 Malta joined the EU and the Central Bank of Malta became part of the European System of Central Banks (ESCB). The Governor of the Bank began to sit on the General Council of the European Central Bank (ECB) and experts from the Bank became members of ESCB committees. All capital controls were removed.
In May 2005 Malta joined the Exchange Rate Mechanism (ERM II) whereby the Maltese lira was pegged to the euro with a central parity rate of EUR1=MTL0.429300. At the same time the Bank started with its preparations for the introduction of the euro as Malta’s national currency. In July 2007 Malta’s entry into the euro area as from 1 January 2008 was confirmed and the central parity rate of the euro with the Maltese lira was set as the irrevocably fixed conversion rate.
On 1 January 2008 Malta joined the euro area and the euro substituted the lira as Malta’s national currency. The Central Bank of Malta joined the Eurosystem and was integrated within the decision making bodies of the ECB. The Governor became a member of the Governing Council of the ECB and experts from the Bank started to participate in Eurosystem committees. Various amendments to the Central Bank of Malta Act, which came into force in the beginning of 2008, brought this Act in line with the requirements of the Eurosystem. From its modest beginning the Central Bank of Malta has evolved into an institution with a status that is equal to that of the other national central banks of the euro area.
The Central Bank of Malta has had the following Governors:-
|Dr. Philip L Hogg||Governor||17 April 1968 – 31 March 1972|
|Mr. Victor A DeMarco||Deputy Governor||17 April 1968 – 17 April 1972|
|Mr. Borge Andersen||Governor||1 April 1972 – 16 March 1973|
|Mr. Carmel L Farrugia||Deputy Governor (acting)||15 February 1973 – 2 July 1973|
|Mr. R J A Earland||Governor||17 March 1973 – 25 January 1974|
|Mr. Lino Spiteri||Deputy Governor||26 January 1974 – 22 November 1981|
|Mr. Henry C de Gabriele||Deputy Governor (acting)||14 December 1981 – 31 August 1985|
|Mr. Henry C de Gabriele||Governor (acting)||1 September 1985 – 6 November 1986|
|Mr. Henry C de Gabriele||Deputy Governor||7 November 1986 – 14 September 1996|
|Mr. Anthony P Galdes||Governor||3 June 1987 – 2 June 1993|
|Mr. Francis J Vassallo||Governor||15 September 1993 – 30 September 1997|
|Mr. Emanuel Ellul||Deputy Governor||5 November 1996 – 30 September 1997|
|Mr. Emanuel Ellul||Governor||1 October 1997 – 30 September 1999|
|Mr. David Pullicino||Deputy Governor||1 July 1999 – 31 March 2010|
|Mr. Michael C Bonello||Governor||1 October 1999 – 30 June 2011|
|Mr. Alfred DeMarco||Deputy Governor||1 April 2010 – 5 May 2015|
|Prof. Josef Bonnici||Governor||1 July 2011 –|
|Mr. Alfred Mifsud||Deputy Governor||5 May 2015 –|
BANK OF VALLETTA
Bank of Valletta is Malta’s longest established financial services provider and one of its largest. Domestic operations include a national network of 45 branches, 6 regional business centres, corporate centre, and a wealth management arm. It has representative offices in Australia (in Victoria), Belgium (in Brussels), Libya (in Tripoli) and Italy (in Milan).
With the advent of British rule in Malta, a group of English and Maltese merchants set up the first commercial bank in the first decade of the nineteenth century during the governance of Civil Commissioner Sir Alexander John Ball. The Anglo-Maltese Bank commenced operations on 23 June 1809 in the ‘Commercial Rooms’, then also known as ‘Le Stanze’, on the ground floor of the University of Studies in Strada Mercanti, Valletta. These Commercial Rooms had a separate access from 113, Strada S. Paolo. The first Cassiere (Cashier) and General Manager of the Anglo-Maltese Bank was the Maltese John Vella and its President was William Higgins, an Englishman who set up business in Malta soon after the publication of the Order of His Majesty in Council of the 15th March 1809. This Order in Council had given Malta an especially favoured status for trading in the Mediterranean. At the same time, it decreed that two thirds of the cargo on ships leaving Malta was to be of British origin or imported from British dominions and that one third of the crew had to be composed of British subjects.
The Banco di Malta, established on 1 May 1812 and operating from 59, Strada S. Domenico saw George Thomas Jackson as President and Agostino Portelli as Vice President. Thomas Jackson had settled in Malta prior to the Order in Council of March 1809 and had become a prominent member of the English mercantile community on the island where in 1812, the importation of British goods had risen to Stg 5,000,000 and amounted to twenty five percent of the total exports to Europe. Agostino Portelli later founded the Chamber of Commerce and was elected President of the Chamber from 1848 to 1851. He was also appointed Knight Commander of St. Michael and St. George in 1850.
The third bank to be set up was B. Tagliaferro e Figli founded also in 1812. This bank, operating from 106 Strada S. Giovanni belonged wholly to Biagio Tagliaferro, a Genoese merchant who had a thriving ship chandelling business and had his own ships engaged principally in the transhipment of grain from Crimean ports. Josef Scicluna et Fils, another bank set up in 1830, with premises at 122, Strada Teatro, was owned by a prominent family of merchants involved in the importation of grain and other merchandise.
For a very long time the Maltese Banks and the mercantile community were burdened with a confused currency and a complicated monetary system. During the early years of British rule the legal circulating currency medium in Malta included the remaining coins of the Order of St. John, which relinquished the island to Napoleon in 1798 as well as Sicilian and Spanish silver coins.
To this potpourri of coins, the Lords Commissioners of the Treasury in London added their own coins and in subsequent years introduced or allowed other foreign coins such as Mexican, South American and Hungarian Dollars to circulate in Malta. Steps for the regularisation of the local monetary system were first taken in June 1825, when British Copper and Silver coins were declared legal tender and the copper coins of the Order were withdrawn. Gold Sovereigns and Half Sovereigns were introduced in 1826. British silver currency, however, was then wholly unserviceable in operations with the markets of the Mediterranean, where the preferred coins, like the Spanish and Sicilian dollars, had a corresponding value in proportion to their weight of fine silver. Consequently, although Government Departments after December 1825 had been ordered and actually began to keep their accounts in Sterling, the Banks and the merchants, for a long time continued to conduct their transactions in Maltese currency (Scudo, Tari’ and Grani).
Moreover, the Anglo Maltese Bank and the Banco di Malta, soon after they were established, began to issue their own promissory banknotes (payable at sight) at first in Scudi denominations and subsequently in Sterling. Although these notes were not accepted by Government, they were widely accepted and recognised by the public and the mercantile community, even though these notes were not guaranteed by the shareholders of the Banks. Although the British Government demonetised all foreign coins and British currency was established as the only legal tender, the Sicilian Dollar continued to dominate the circulating medium until their final withdrawal in 1886 when, by an Order in Council, British coins became definitely the sole legal currency in Malta.
In 1857, the Anglo-Maltese Bank and the Banco di Malta moved their offices to the ground floor of the newly erected Exchange Buildings in Strada Reale. Apart from these two Banks, B Tagliaferro e Figli and Josef Scicluna et Fils, a number of other Banks including James Bell & Company and the Anglo Egyptian Banking Company Limited were set up in Malta before the end of the nineteenth century. However, it was the first aforementioned four pioneers of banking in Malta who subsequently merged. The two oldest banks, the Anglo Maltese Bank and the Banco di Malta, were amalgamated in January 1946 under the name National Bank of Malta with Comm. Antonio Cassar-Torreggiani OBE as Chairman. In 1949, Sciclunas Bank was affiliated to the newly established Bank which, twelve years later, moved to a new Head Office at 45, Kingsway, Valletta. In 1969 ninety per cent of the private bank of B. Tagliaferro & Sons, then operating under the name of Tagliaferro Bank Limited, was bought by the National Bank of Malta.
As one of the leading financial institutions, the National Bank of Malta made a rapid expansion in branch network and provided more banking facilities to an ever increasing number of customers as well as financing a number of large projects initiated during the extremely difficult post Independence period.
In 1973, following a run on the National Bank and its subsidiary Tagliaferro Bank, the Government intervened and a three-man council of administration was appointed after Parliament passed the ‘National and Tagliaferro Banks (Temporary Provision) Act 1973’. On 22 March 1974 the Prime Minister announced the setting up of the Bank of Valletta. The new Bank, which took over the assets and liabilities of the National Bank Group, commenced operations on 25 March 1974. The Government, injected Lm3.3 million (equivalent to €7.7 million) into the new Bank and obtained controlling interest by retaining sixty per cent of the capital. The balance (40%) was taken up by the Malta Development Corporation which, in turn, sold twenty per cent to the Banco di Sicilia and ten per cent to the Maltese public. In 1986, the Bank inaugurated its first overseas representative office.
In 1990, the Government’s stake in the Bank was reduced to 51.2% as 4.9 million shares were issued and offered to the public. In the same year, following the amendments to the Banking Act 1970 (Act No. XXVI of 1990) whereby Banks were allowed to establish their own long term lending subsidiary, Bank of Valletta launched its fully owned investment bank – the subsidiary Valletta Investment Bank.
In 1992, Bank of Valletta International Limited started operating. This wholly owned International banking subsidiary of the Bank of Valletta Group was Malta’s first Offshore Bank. 1992 was also the year when Bank of Valletta became the first bank to be listed on the Malta Stock Exchange.
Bank of Valletta p.l.c. was the first banking institution in Malta to take up the opportunities that were created as a result of the 1994 Financial Services legislation by setting up Valletta Fund Management Limited (“VFM”) in 1995. This Company is jointly owned by Bank of Valletta p.l.c and Insight Investment Management Limited, one of the UK’s largest asset managers. VFM has throughout the years launched a wide range of domestic and international investment funds providing income and growth opportunities in the world’s capital markets offering clients a varied range of investment solutions. VFM is licensed by the Malta Financial Services Authority (“MFSA”) to provide Investment Services Business for Collective Investment Schemes in Malta and to operate as a “Maltese Company” pursuant to the Undertakings for Collective Investment in Transferable Securies regulations (“UCITS”).
In September 2000, BOV set up its stockbroking arm, namely BOV Stockbrokers Limited (“BOVSL”). Bank of Valletta International Limited, Valletta Investment Bank Limited, Card Services Limited and BOVSL were merged within Bank of Valletta p.l.c. The Bank has also implemented a relationship banking strategy where more focus is being placed on customer requirements. Significant investment has gone into introducing state-of-the-art information technology such as internet, telephone and mobile banking.
BOV continued to consolidate its internationalisation strategy through the opening of other representative offices in the Euro-Mediterranean region namely Cairo-Egypt (until 2011), Tripoli-Libya and Tunis-Tunisia (until 2011). Moreover, through its Investment Banking Unit, the Bank has been very active on the capital markets. In December 2003, BOV acted as manager, underwriter, registrar and paying agent for the first European Investment Bank Lm10 million (equivalent to €23.3 million) bond issue. With Malta’s accession into the European Union, Bank of Valletta has become an active member of the European Savings Banks Group. Meanwhile, in August 2006 the Bank set up a fully-fledged Trustee Services Unit.
The Bank offers its services through a network of over 44 branches and agencies located around the Maltese Islands, as well as its overseas offices. Today, the Bank’s BOV Centre is located in Santa Venera.
On 6 October 2006, BOV announced the setting up of a new subsidiary company – Valletta Fund Services Limited- which is in the fund administration business.
Apart from the AGM, the Bank communicates with its shareholders, by way of the Annual Report and Financial Statements, by publishing its results on a six-monthly basis, by the publication of a quarterly newsletter and by the issue of “Notice to the Public” and “Company Announcements” to the market in general. The Bank’s Investor Relations Officer maintains two-way communication between the Bank and investor communities, both locally and internationally. The Bank’s presence on the World Wide Web contains a corporate information section.
Customers have access to automated teller machines (ATMs) around Malta and Gozo. Bank of Valletta has invested in a series of new ATMs, which are the first of their kind to be installed locally. Cash deposits effected through these ATMs are available in customers’ accounts in real-time due to a mechanism which scans the legal tender deposited. The BOV DRIVE-THROUGH ATM was another innovation for the islands, enabling customers to transact banking services from their car.
Valletta Fund Management & Valletta Fund Services Limited
Valletta Fund Management Limited(est. 1995), is jointly owned by Bank of Valletta and Insight Investment Management (Global), one of the UK`s largest asset managers. VFM has a wide range of domestic and international investment funds.
In 2006, BOV set up of a new subsidiary company – Valletta Fund Services – which consolidated the capabilities of the BOV Group in the fund administration business.
APS Bank was established in 1910 as one of the projects set up by l’Unione Cattolica San Giuseppe. It was intended mainly to motivate savings habits amongst the working classes. Since then its role has developed and evolved and the Bank has managed to position itself as a cost efficient financial institution, whilst retaining personal banking as its major strength.
The history of APS Bank is undoubtedly not only one of general interest but has also to date remained of constant relevance to the Bank. Circumstances and events over the past hundred years have influenced and eventually shaped the role, responsibilities and social obligations of the Bank.
Appostolato della Preghiera
The Appostolato della Preghiera (Apostleship of Prayer) was set up on the initiative of a group of people led by the Jesuit Fr. Michael Vella. They were motivated by the desire to instill among the working classes of the population a consciousness of the social teaching of the Catholic Church and to put it into practice. The association, which was later called l’Unione Cattolica di San Giuseppe (St. Joseph Catholic Union), was founded towards the end of 1909 whilst the first committee was selected on the 6th of May 1910.
Activities and Projects
The first venture and definitely the most significant was the establishment of a Savings Bank, the Cassa di Risparmio dello Apostolato della Preghiera, in October 1910, which was intended mainly to inculcate savings habits amongst the working classes of the population.
Another milestone was the funding of various projects of a social nature and these were subsidized by the Savings Bank. These long term projects included the setting up of l’Unione Cattolica di Mutuo Soccorso Artistica ed Operaia San Giuseppe, a mutual benefit scheme and the establishment of a printing press, which was known as the Empire Press (forerunner of the Media Centre), a recreational club, an emigration bureau to aid Maltese citizens settling in overseas territories. Various schemes to help the poor including the distribution of free meals and medicines and the provision of free medical care as well as an evening school and classes for craftsmen.
The Savings Bank
A savings bank in Lyons and another in Italy were contacted and these assisted the Committee to form the Savings Bank’s initial regulations which were later approved. Deposits from the public were first accepted on the 7th December 1910, and these consisted of one deposit of a pound and four deposits of one shilling each. Throughout the same month subcommittees were set up in various parishes which enabled the Bank to reach out the general public outside Valletta.
World War II
As the years went by the volume of work started to increase. However during the second world war period (1939 – 1945) the Bank’s progress was seriously hampered and the Parish Committees ceased to function.
The Archdiocese of Malta
In November 1947 the St. Joseph Catholic Union together with all its branches including the Savings Bank, which had retained the original name of the Apostleship of Prayer Savings Bank, was transferred to the Archdiocese of Malta. The Archbishop appointed a Committee of Administration which was also entrusted with the running of the Bank.
A Private Limited Liability Company
Following the setting up of the Central Bank in 1967 and subsequent legislation involving the Banking sector, a private limited liability company was incorporated and registered on 1st June 1970. By that time, the company took over the responsibility for the running of the Savings Bank.
In March 1977, the then Minister of Finance, Customs and People’s Financial Investments issued a Banking Licence to the Bank in terms of the Banking Act 1970.
The New Premises
Late in 1985 the Bank purchased premises in St. Paul Street, Valletta. The building was completely renovated and opened for public use on the 2nd July 1988.
During 1985 a decision was taken to introduce computerisation. However, in view of lengthy procedures that ensued, it was only in late 1990 that this project was initiated.
APS Bank Ltd.
During the year 1990 a thorough study of the Bank’s future potential was carried out. With the Shareholders’ approval, the name of the Bank was changed to APS Bank Ltd and an application was submitted to the Central Bank of Malta for a licence to operate as a Commercial Bank. This licence was issued by the Minister of Finance in November of that same year. Commercial banking operations commenced in September 1991.
The Bank continued to tap new avenues for further expansion. Amongst the most significant one must mention:
A stand alone Foreign Currency Exchanger and a Deposit Machine at St. Julians, were installed and became operational in 1993;
The branch in Republic Street Valletta which was opened in 1993;
Gozo Branch opened in 1994;
Floriana, which now houses the Head Office, and another branch opened in 1995;
Attard branch started operating in 1997;
Mosta branch was opened in 2003;
Paola branch in 2004;
Rabat branch in 2011;
A new image … same ideals
On 23rd June 2003, after a heavy investment made by the Bank, a new corporate image was launched with a new logo and uniforms to reflect the direction the bank has chosen to follow. The Bank to date still considers itself as an ever-caring and important central column of the community.
New Subsidiaries, Memberships and Services (2006 – 2008)
The Bank’s close contact with various economic sectors indicated the need for an institution to accelerate the restructuring process to face tougher competition from abroad. In response, the Bank set up APS Consult Ltd in 2006 to achieve this end. Through education and support networking this subsidiary strives to enhance the resources in agriculture, welfare services and sports, thereby expanding in a concrete manner the significance of the term ‘personal and institutional empowerment’.
THE ANGLO EGYPTIAN BANK
The Anglo-Egyptian Bank was a British overseas bank established in 1864. The founding banks were Agra and Masterman’s Bank and the General Credit and Finance Co., and the bank incorporated Pastré Frères et Compagnie (est. 1821; reorganized 1827) and Giovanni Sinadino and Co., which was the only one of the four to have its seat in Egypt, in Alexandria. The senior officials of all four firms sat on the first board of directors.
In addition to its activities in Egypt, the Anglo-Egyptian opened branches in the British Mediterranean, where it frequently acted as banker to the British authorities.
From 1921 on, Barclays Bank had a controlling interest in Anglo-Egyptian. In 1925, Barclays Bank merged Anglo-Egyptian with two other banks to form Barclays (Dominion, Colonial & Overseas). In 1956, following the Anglo-French attack on Port Said, the Egyptian government sequestrated the 19 branches, one sub-branch, and 26 agencies in Egypt, using them to found Bank of Alexandria.
HSBC Malta dates back to the commencement of operations in Malta by the Anglo-Egyptian Bank (est. 1864), which merged with the National Bank of South Africa and The Colonial Bank (est. 1836) to become Barclays Bank Dominion Colonial Overseas in 1925 after Barclays acquired The Colonial Bank when it acquired the London Provincial and South Western Bank in 1918. In 1954 the bank shortened its name to Barclays Bank D.C.O. and in 1971 became Barclays Bank International.
In 1975 the government of Malta nationalized Barclays Bank International’s operations in Malta and renamed it Mid-Med Bank, exercising its option to purchase Barclays’ remaining shareholding in Mid-Med in 1979.
In 1991 the Maltese government sold 33% of Mid-Med Bank to the public and in 1993 Mid-Med listed on Malta’s stock exchange. Mid-Med acquired 25% of Lohombus Bank, which specializes in housing finance, in 1995 along with the Investment Finance Bank in Malta. Mid-Med gained a majority of Lohombus Bank in Malta when it acquired another 35% of the firm in 1996, the same year it established a representative office in London.
Mid-Med joins the HSBC Group
Midland Bank was the first foreign bank to be granted an unlimited banking license in Malta, where it opened a branch in September 1996. Then in 1999, Midland Bank acquired the government of Malta’s 67.1% direct holding in Mid-Med, as well its 2.7% indirect holdings. Part of the agreement was that for the time being the bank would continue to be listed in the Maltese stock market and that Midland would not make a formal offer for the remainder of the shares but could buy if other shareholders chose to sell. At the time, Mid-Med bank had 60 offices and branches, 1,800 staff and was the largest commercial bank in Malta.
When HSBC brought all its operations under a common name, Mid-Med became HSBC Malta Bank plc. HSBC absorbed Mid-Med’s representative offices in Dubai, Milan, and Luxembourg into the HSBC offices in their respective countries but established a “Malta Desk” in several of these countries. Lohombus Bank became HSBC Malta (Home Loans) Ltd.
Malta Call Centre
In April 2006 HSBC announced that it would be opening a new call centre in Malta, with an investment of €7 million and the creation of 350 jobs. The centre will deal with calls from HSBC Bank’s customers in the United Kingdom, and operate as a branch of that company, under the oversight of HSBC Malta management.
Lombard Bank Malta p.l.c. is licensed as a credit institution by the Central Bank of Malta and for investment business by the Malta Financial Services Authority. The Bank is an authorised currency dealer and a financial intermediary on the Malta Stock Exchange. It is also a member of the Deposit Guarantee Scheme and the Investor Compensation Scheme.
Lombard Bank Malta p.l.c. dates back to 1955, when Lombard North Central of the UK was active in deposit taking in Malta through a number of agents. This arrangement was formalised in 1969 when Lombard Bank (Malta) Limited was registered as a wholly owned subsidiary of Lombard North Central plc. Today the Bank is privately owned with the single largest shareholding (circa 49%) held by Cyprus Popular Bank Public Company Ltd. of Cyprus and the remaining shares in free float on the Malta Stock Exchange.
The BICAL saga in chronological order
An overview of some of the relevant dates and events
1962 – Brothers Henry and Cecil Pace open the BICAL bank. They are the shareholders and directors of innumerable companies spanning the whole economic spectrum – shipping, hotels, finance, manufacturing and motor vehicles. Cecil Pace is one of Malta’s foremost entrepreneurs. Together with his brother, the BICAL bank and its associated companies employ 3,300 workers. Even Dom Mintoff, Labour Prime Minister between 1955 and 1958, and later from 1971 to 1984, acknowledges Cecil Pace’s status. In the late fifties, with Cecil Pace on tow as a business representative, Mintoff would introduce Pace as a “successful industrialist,” when on trips abroad to promote Malta.
1970 – Central Bank (CB) inspectors identify BICAL as being in a bad situation and exposed to great risk due to a shortage of liquidity, excessive loans beyond the bank’s means. The inspectors contend that these loans were concentrated on a small number of industries in which the president and one of the directors of BICAL had major interests, a practice not in conformity with banking practice. The CB report is corroborated by accountants Cooper Brothers Ltd, who suggest the appointment of a controller to regulate the bank’s dealings.
1971 – Labour is returned to power. Finance and Customs Minister Guze Abela gives orders for the immediate examination of BICAL affairs by Central Bank inspectors.
November 1972 – Cecil Pace gets to know through Hambros Bank that the credit limit in BICAL’s account of 360,000 pounds has been exceeded. Baffled, Cecil Pace calls for one of his managers: Lawrence Cachia Zammit, brother of former PN Health Minister Alexander ‘Sandy’ Cachia Zammit, and also treasurer of the Nationalist party. He admits to having made unrecorded foreign transactions of up to 360,000 pounds sterling, which were allegedly made to pay for printing equipment purchased by the Nationalist party apart from other personal payments made by Cachia Zammit in the expensive pastime of keeping racehorses. The bank appears to have never been repaid by the Nationalist party for the disbursements of foreign payments made through the Hambros bank. Cachia Zammit had in fact written a letter confirming the discrepancy of funds, and offering to make up for the missing funds by personally transferring property to Cecil Pace’s companies.
November 20, 1972 – Cecil Pace receives a telephone call from Robert (Bobbie) Stivala, Guze Abela’s private secretary. At 9.45 pm, Cecil Pace, accompanied by his lawyer Albert Ganado, drove to the Finance Ministry. The writing was on the wall, and Bobbie Stivala did all the talking: “From this time on, your bank is no more, I suggest you co-operate fully with the Central Bank.” In the following days, BICAL encounters a run on its reserves. Guze Abela, Finance Minster, is one of the many depositors who make sure they withdrew all their monies from BICAL before the appointment of a CB controller to take over the bank – according to Cecil Pace the amount is Lm5,000, certainly no coincidence.
November 25, 1972 – A DOI statement announces the bank is to be closed for a time to allow for talks with the Finance Ministry. Central Bank manager RJA Earland appointed Controller.
November 28, 1972 – Karmenu Mifsud Bonnici is appointed BICAL controller to take over the bank’s and its associated companies’ assets and sell off as much as is needed to clear all the bank’s and its companies’ debts and liabilities. With his bank under control by Mifsud Bonnici, Mintoff’s right-hand man, Cecil Pace learns much about the motivations behind the closure of his bank. He cannot understand why the evident surplus of assets over liabilities threatens the closure of his bank.
January, 1973 – Two messengers bring home the reality behind the closure of the bank: at the newly-opened Excelsior Hotel, Justice Minister Anton Buttigieg candidly asks Cecil Pace whether he would consider taking on Mintoff as a business partner. Buttigieg suggests to Cecil Pace he transfer part of the bank that was later to be closed down, to Mintoff’s nominees. In return Cecil Pace would have the possibility to open new branches and to take over government accounts.
Cecil Pace had already been asked to accept to become deputy leader of the Labour party by Mintoff. An employer of 3,000, and a popular personality, Pace had the ability to garner great support for the MLP. “Not being politically minded, I rejected the offer. Soon I was approached again, this time with the proposal to sign away half my equities to nominees and be rewarded with ‘choicy’ contracts for my companies whilst my bank would be handling Government accounts and permits to open branches all over the island,” Pace says.
January 5, 1973 – KMB asks Cecil Pace to sign the deal with Mintoff, or else face the consequences. The next day on 6 January 1973, Cecil Pace waited for the police to arrive, to be taken to Kordin.
October, 1977 – Following four years of imprisonment and house arrest, Cecil and Henry Pace are convicted for misappropriation, fraud and forgery. Cecil is sentenced to 14 years, and his brother 9. According to a Court registrar overhearing a telephone conversation between the presiding Judge and Dom Mintoff, it is Mintoff who gives the blessing for the maximum sentence allowed.
1985 – Cecil Pace is released from prison. He now has to face Karmenu Mifsud Bonnici then Prime Minister of Malta, appointed by Dom Mintoff himself. Cecil and Henry Pace initiate a series of legal proceedings into the mishandling of BICAL and its companies and the apparent reticence of Controllers to pay off the depositors at the BICAL bank.
November, 1995 – Parliament passes a law which grants immunity from prosecution to the BICAL Controllers, which stops the Pace court actions from being heard in Court and transferred the cases instead to a tribunal presided over by a Finance Ministry-appointed lawyer.
2003 – Fresh new allegations into the political intrigue behind the closure of BICAL are revealed in MaltaToday. Around 20 per cent of BICAL depositors remain to be paid, but the bank is still under control. BICAL Controllers are revealed to have squandered hundreds of thousands in BICAL monies to pay for their services, estimated to amount to over Lm2 million in 30 years. Cecil Pace, now 73, is still fighting for the recovery of BICAL monies to be given to the rightful depositors and the release of his companies from control.