Times (Malta) 22nd October 1980 DIRECTOR TESTIFIES ON EVENTS LEADING TO 1973 RUN ON NATIONAL BANK

Events leading to the run on the National Bank of Malta and Tagliaferro Bank in 1973 were described in the Commercial Court last week by Dr. Philip Attard Montalto. The witness was tendering evidence before Mr. Justice Schembri in the case instituted in March 1977 by Mr. Peter Cassar Torreggiani, Dr. Joseph Apap Bologna and Mr. Edgar Montanaro Gauci as directors of NBM Investments Limited against the Prime Minister, the Finance Minister and others. Plaintiffs are requesting the Court to declare and decide tht the transfer of National Bank shares made without consideration by Maria Colombos, Ida Von Brockdorff, Alice von Brockdorff and Violet Calleja Gera to the Government in February and March of 1974 were null and without any effect at law. These transfers are claimed to have been affected by vicious consent, to be without cause, to be unstamped contrary to what is required by law, and not to have been made by means of a public deed. Over 170 shareholders Dr. Philip Attard Montalto, who in 1973 was a director of the National Bank of Malta Ltd. and Tagliaferro Bank Ltd. testified that there were over 170 shareholders in the National Bank of Malta, including B. Tagliaferro & Sons Ltd. which was the principal shareholder of which he was Managing Director. Though in early December 1973 there was a run on the two banks, the directors were not so bothered since they knew that they had enough liquid assets. The fun gathered momentum, however, owing to rumours which were making the rounds. A Board meeting was called by the general manager and chairman of the Bank, who assured the directors that the Bank had 30 per cent liquid assets, while the minimum required by law was of 25 per cent. Meeting with the Prime Minister Precautions were taken, however, and several meetings were arranged with the Central Bank. On December 7, the Central bank arranged a meeting with the Prime Minister and with the Chairman of the Bank. The meeting was attended by Dr. Robert Staines, Board Secretary, Mr Antoine Tagliaferro, an accountant, Mr. Louis Vella, Bank chairman, and Mr. Henry Micallef, General Manager. The Central Bank would have liked to issue a statement to set minds at rest about the run on the banks, but the Prime Minister had said that the statement was too weak and that it would not stop anything.

The Prime Minister meanwhile said that it would be better to close down the bank to stop depositors from withdrawing their money. Mr. Earland, then Central Bank Manager, said that would be inconceivable as it would cause more damage than any good. Two alternatives A Board meeting was held on Monday December 10 at 3.30p.m. Mr Louis vella and Mr. Henry Micallef had meanwhile been attending a meeting with the Prime Minister. On returning at about 3.30 or 4 p.m., they informed the meeting that the Prime Minister had laid before them two alternatives: either that they give him the Bank without Government paying any compensation, or else if they carried on they would do so at their own personal risk and that of the shareholders. The Prime Minister added that he would withdraw M4 million in parastatal funds deposited in the Bank and so all Malta would know that the Bank had gone bankrupt. The Prime Minister had also said he had to be at Parliament at 5.30 p.m., by which time he wanted to have their reply. It was a Hobsons choice, the witness stated, and the Prime Minister did not have to consider any other proposal by to have the Banks in his hands. It was also reported at the meeting that the Prime Minister had said that if the next day he was to be told by them that the Bank had gone bankrupt, God help them because all malta would know and the shareholders would be personally responsible for what would have happened. Attorney Generals request When a delegation called on the Attorney General, Dr. Edgard Mizzi, at the Palace in Valletta at 5.30 p.m., they requested him to give them some time to arrange matters with the other banks, even though two hours were too little for such deals. They told him they would contact Barclays Bank, but the Attorney General definitely refused that they shouldtalk to Mr. Louis Galea who at the time was with the Prime Minister. He also said that Barclays had already taken the pill even though the witness could not explain what the Attorney General meant by this expression. The delegation also requested Dr. Mizzi that they might contact the Midland Bank, but they were told that unless they handed over the Bank at that instant as the Prime Minister was about to address Parliament on the whole matter, the M4 million in parastatal funds would be withdrawn from the Bank the next morning. The Attorney General had also requested them to hand over at least 51 per cent of the shares indicating that these had been given away for free. Lack of support

The witness stated that the National Bank at that moment did not have any support from anywhere. Although the Central Bank wanted to help it was not permitted to do so. Meanwhile the Banks liquid assets were steadily diminishing since the depositors kept on withdrawing their money and Government aid was not forthcoming. The management itself could have declared the Bank to have gone bankrupt, but they had then also taken into consideration the fact that they were holding some M40 million belonging to depositors, that they employed 300 persons, and that many of Maltas industries and hotels depended on the same Bank. A Palace meeting was held later than same evening with the Prime Minister, several Government Ministers, Mr. Camilleri, the Prime Ministers Secretary, Dr. Edgar Mizzi and Mr Louis Galea of Barclays. The Prime Minister said he was about to tell Parliament that evening that the directors had handed over the Bank to him. When Mr. Louis Vella at this point objected, the Prime Minister told him that they had been telling him and Mr. Henry Micallef for a long time what they should do; it was then up to him to talk. The shareholders had had enough of it and he was going to tell the people that they had handed over the Bank to him for free. Dr. Attard Montalto told the Prime Minister that this could not be done for free. Had he the courage as Prime Minister who could legislate any law he wanted, he should have nationalized the Bank and compensated them through the Audited Accounts. The Prime Minister said that he was no nut and that such business was not favourable to him. The witness told him he knew it because he had not intervened at the time of the NICAL crisis. Dr. Attard Montalto further testified that several persons had advised the Prime Minister not to close the Bank, including the general manager of the National Bank and of Barclays, since he would bring about much damage; but the Prime Minister did not commit himself at that stage about what he was going to do. The Prime Minister then told Mr. Austin Cassar Torregiani to collect the share certificates for him. Bank closed After the Prime Minister had addressed Parliament, the run on the banks increased considerably. Some 1.3 million were withdrawn in a day, Tuesday, December 11, 1973. In the evening the Prime Minister appeared on television, referred to a stampede of cows and announced that the Bank was to be closed. This was a surprise for everybody, the witness stated, including the Central Bank itself which had advised the Prime Minister against closing the Bank. At 3.30 a.m. of Wednesday December 12, the Police called on all the Bank directors giving them notice in terms of the Banking Act, 1970, of the banks closure. Mr Lino Spiteri was entrusted with the Banks assets. Board and other meetings went on during the day until they again met the Prime Minister at Castille at 1.30 p.m.

According to the witness, the Prime Minister was then in one of his worst tempers. Dr. Attard Montalto entered a note in his files that this meeting was the worst experience I have had in my life. The Prime Minister stood up and started shouting, inveighing against everybody for not doing anything, for having taken a long tme to wind up matters, and for telling them about this for a long time. He asked Mr Cassar Torregiani why he had not yet collected the shares, to which Mr Cassar Torregiani replied nobody was going to give away his shares for free. The Prime Minister had also stopped Mr. Henry Micallef from intervening, telling him he had heard enough from him. The witness had then also intervened, requesting the Prime Minister to give them a chance to settle matters calmly. The National Bank corresponded with the Midland Bank, while Tagliaferro Bank corresponded with the Westminster Bank. He had also spoken to Mr. Louis Galea of Barclays Bank who told him that it was not in their interest to destroy the National Bank, and that they were ready to help. The Prime Minister stopped Dr. Attard Montalto from talking and from then on referred to him as the rescue operation man. Signing away shares At one time, Mr Louis Galea referred to the documents the shareholders had been requested to sign. Mr Mintoff said that those shareholders who did not sign would have been personally responsible for the outcome. That evening he was going to pass either of two laws in Parliament. One would have set up a Council of Administration to take care of the Banking Groups assets and liabilities; the other would have taken away the limited liabilities of all the shareholders. The Attorney General had then also affirmed that two Bills had been drafted. The witness further stated that the shareholders had offered major resistance to the giving up of their shares and that it was only after several meetings that the shareholders were left with no doubt as to the limited liability threat. Many shareholders had signed away their shares for this reason, and no other. Courts decree Referring to the transfer of shares belonging to Marquis Scicluna dn Count Sant Fournier the witness said permission was required from the Second Hall of the civil court for their transfer. It took a four-hour sitting before Judge Xuereb to obtain the necessary decree. Applicants had then explained to the Judge the ciroumstances leading to their course of action and that they could not find any other solution to the issue. The Judges reaction was that it could not be that they gave up their assets without any compensation. The Judge at one time also contacted Dr. Edgar Mizzi by phone at the Palace and talked matters over with him, for half-an-hour. The Judge appeared to be undecided and at one

time during the sitting Dr. Mizzi phone back telling the Judge tht the Prime Minister wanted a quick decision. The Judge said he could not decide such issues quickly and called Dr. Mizzi to testify before him in the Second Hall. Dr. Mizzi had then actually testified that the shares had no value at that stage since the Banks licence had been suspended, that the Prime Minister was resolved not to leave the Banks in the hands of the shareholders, and that the shareholders themselves had their deposits in the Bank and it was in their interest that the Bank would be salvaged by the Government. Dr Attard Montalto also added that the Prime Minister himself had at one time spoken to the Judge, but he could not tell anything about the conversation. Pressure on shareholders After that date pressure continued increasing on those shareholders who had not signed. Some shareholders were also approached in Rome to sign the transfer of their shares. Pressure was also exerted on shareholders who had a debit with the Bank, in that they were threatened about their overdrafts with the Bank. Such threats had never ceased to this very day, Dr. Attard Montalto testified. The case stands adjourned. Dr. R. Farrugia is plaintiffs counsel; Senior Counsel Dr J. G. Borg is counsel to defendants.