Our Sponsors

VIPCoFCCGBroadridgeLink Market Services GmbHAHEADhermesDP DHLK+SSAPGeorgesonSuedzuckerWacker Chemie AGThomson ReutersEQS Group

Search

VIPsight

Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.
     

VIPsight International


Welcome to VIPsight Europe - Malta

 

Author

   
Joseph Bonett  

 

1 November 2017

FEEDBACK are venture of Better Finance in Partisan Politics of Climate change

In our opinion it is better not to get involved in the partisan politics of Climate Change. This band wagon is being promoted by a USA vice-president and I for one will not take marching orders from a US has been vice president.

I for one am in favour of climate change. For example centuries ago Iceland was more fertile than it is today undoubtedly as the world was warmer and at that time no scientist can blame that natural Earth cycle on man made emissions. If the Earth becomes warmer, large areas now uninhabited would open up to become habitable. Also sea transport would be facilitated in seas bound over much of the year. As an association, very small admittedly, we are all in favour of what adds value, increases opportunities for investment offers challenges to be overcome by more investment!

When the Icelandic volcano a few years back grounded for days all flights in Europe, was this man made?

The ash spewed out undoubtedly has contributed to global warming, as the massive erruption of the Indonesian volcano so many years back to mention just two examples. By writing into laws the curtailment of carbon emissions our right to freedom of movement is being violated, as well as our right to private property. When Britain decommissioned its coal fired power stations due to such concerns and sold them cheaply to the People's Republic of China, we saw a seismatic shift in investment from the old Continent with its clear cut and respectful industrial regulations to an area where workers are virtually 'serfs' in the Workers' Paridise

As you know, countries with a parliamentary democracy abide by what they sign in international treatises. Not so dictatorial regimes such as Russia, China, Vietnam...should we allow these rivals in finance beat us by getting ourselves tied up? (in garters I was going to add, a once used English expression before 'political correctness' set in!)

 

19 July 2017

Rumblings in Malta

An attempt was made to sideline me by stooges for the party in power, however I do not campaign for shareholders rights according to whether it pleases the powers that be or the opposition party but being non-partisan political I always have held and hope to hold a high ethical standard which translates in little financial support coming this way! But no matter thrift never killed!

I am aware that in the United States (maybe elsewhere) it is increasingly being pushed that shares are issued with no voting rights; In Malta the Bank in which the state has the 'lion's share' though not a majority of shareholding recently lost Correspondence Bank status with amongst others Deutsche Bank.

I guess this was for a weighty reason though its new top appointee (an employee) tried to justify it. Incidentally its Chairman, a man of standing, resigned, or was made to resign to be replaced by said employee to do 'his master''s bidding' Now the group in control are determined to deprive shareholders rom yearly voting in a Board of Directors but instead having a Board appointed for 3 years at a stretch. Something similar has already been implemented as regards Local Councils in Malta and Gozo so now the march for absolutism is directed at the public institutions through 'puppets on a string'.

 

 

31 January 2015

Malta Stock Exchange

At present the largest deal on the Malta Stock Exchange is underway. The company which operates amongst others the Hotel hit recently in Tripoli, Libya, Corinthia is proposing to take over the Maltese franchise hotels of the Radisson brand. Both are at the lower end of the dividend paying league. Some speculate that the large family shareholders of the Malta Radisson brand want to ride along in the comfort of the much larger Corinthia with the retail shareholders again and again having their holdings % diluted. 75% of Radisson Malta is held by three members of one family, one of whom might have signaled that he wanted out, which would have sent waves. Radisson Malta is hosting the Heads of State of the forthcoming ex-British empire, Commonwealth.

Corinthia, run by International Hotels Investment (IHI) is also facing diminishing returns from its hotels in Libya, St. Petersburg, central Europe (it also has a hotel in Portugal and one in London). Might it want to get its hand on the Euro 35 million recently taken in by Radisson Malta from its freshly issued Bond? A Bond which at the time did not mention anything about a tie up with Corinthia? Apart from which another Bond issued to finance a mixed hotel and commercial project in Libya is on hold because of the civil war, yet the coupon will very soon come up for payment....

There is much speculation going about, and some are seeing more pieces falling into place when looking back at the time just prior to the issue of the Island Hotel Group Company (IHGC) bond issue, when one of its 4 hotels was 'sold off', thus burdening the company with a Euro 35 million Bond on 3 hotels not 4!

From the Malta & Gozo Shareholders Association (MAGOSA)

 

28 November 2014

KPMG Malta to buyout listed IT company

In Malta, KPMG made an offer to acquire Crimsonwing, an international IT company focusing on Microsoft Dynamics and e-Commerce business solutions. Crimsonwing is listed on the Malta Stock Exchange.

KPMG's offer values Crimsonwing at €26 million.If successful, the acquired business will become known as KPMG Crimsonwing and will be jointly owned by KPMG's firms in the UK, Netherlands and Malta. Crimsonwing's Founder, David Walsh, will be chief executive of KPMG Crimsonwing which will combine KPMG's current Microsoft Dynamics teams in the UK and Netherlands with Crimsonwing to create an overall team of approximately 350 people. The combined entity has a goal of more than doubling in size over three years.

Crimsonwing plc, founded in 1996, is an award-winning consultancy providing industry-specific business, mobile and cloud solutions for international clients related to Microsoft Dynamics and e-Commerce. Crimsonwing developed market leading software incorporating their own intellectual property creations for industries such as print management, property lease management and for membership organisations.The proposed acquisition is consistent with the KPMG's strategy of building an Advisory practice which combines business expertise with the underlying technology capabilities required to implement business solutions. If successful, it will follow the acquisition of Safira, a provider of Business Process Management solutions, and Cynergy Systems, a Digital and Mobile specialist.

The deal will make m the KPMG Malta the largest professional services employer in the Maltese islands. It will help to employ even more people in Malta and provides access to European-based clients. Combining Crimsonwing with the Dynamics consulting team will strengthen and cement KPMG's position as a leading business partner of Microsoft.

 

17 November 2014

Locally one of the listed banks in Malta, Lombard Bank Malta Limited has as one of its largest shareholders a Cyrpriot bank which for the past months if not years has not been sending its directors for Board meetings. This Malta Stock Exchange listed bank, though being one of the original banks listed on this Exchange, has time and again not been subjected to the European stress tests as it is deemed not large enough. Is it lucky for Lombard Bank Malta Limited that time and again there are other non listed banks in Malta with a larger balance sheets who get stress tested instead?

Joseph Publius

 

27 August 2014

Blind men leading the blind?

At a time where investors/shareholders are seeking better returns, so too in Malta many are investing handsomely in ungraded local bonds which pay a slight premium on the public treasury rate for its gilts. Till now maturing bonds have generally been rolled over at an ever deceasing rate of interest. Maltese investors/shareholders are rumoured to have burned their fingers on the princely sum of half a billion euors lost in investments overseas such as in Argentina, the Netherlands and elsewhere.

When a decrease in FDI is welcome news

Investors/shareholders in Malta listed equities do not always look with pleasure on an increase in FDI (foreign direct investment). They have good reason to be wary. Malta is a small market and largish international companies have in the recent past swooped on fat Malta Stock Exchange listed companies, taken them over with little opposition or benefit such an increase in share price for decade long holders by small investors of such shares. A case in point is the Spanish Mapfre group takeover of Middle Sea Insurance.

Malta's largest listed equity

Ongoing turmoil and violence in Libya and Ukraine have taken a toll on the profit levels of the Malta Stock Exchange-listed International Hotels Investments (IHI), which trades under the Corinthia brand name, for which it paid millions just before the overthrow of Ghaddafi. Its interim profits having dropped to €12.4 million from the €16.3 million registered in the corresponding period last year.
The group registered a loss after tax of €7.7 million compared to the loss of €4.4 million reported in the same period last year.
In its interim report published this week, IHI said that “…external and unforeseen political events in Russia and Libya have significantly impacted demand for hotel accommodation in St Petersburg and Tripoli”.
The group explains, “Libya is a major concern. The current conflict in and around the Tripoli airport area has severely curtailed international demand for hotel accommodation in the city. Nevertheless, in spite of the prevailing challenges, IHI continues to operate its hotel with a core nucleus of staff after having implemented a significant down-sizing of both local and expatriate personnel. Likewise, all other operating costs have been thoroughly reviewed and reduced as necessary.
“Given the downturn in business, the value of the group’s property in Libya would normally need to be tested for impairment as at 30 June 2014. Such an exercise is based on projected cash flows discounted to present day value. In view of the unpredictable situation in Libya, such a test would necessarily need to take into account a number of differing scenarios which would render the exercise unreliable.”
On its hotel property in Russia, IHI said, “In Russia, the performance of the Corinthia Hotel St Petersburg has been adversely affected by the developments in Ukraine resulting in a volatile rouble, weakened international demand for hotel services in the country, and the cancellation of a number of major events and conferences planned to be held in the city earlier in the year. In order to mitigate the resultant impact of these conditions, management has been directing its efforts towards replacing the lost foreign business with other business generated from within the Russian Federation. Furthermore, these events might have an impact on the value of the property at year end.”
It warned, “The above events that have negatively affected the financial performance of Corinthia Hotel Tripoli and Corinthia Hotel St Petersburg are expected to impact further the results of the group for 2014.”
Elsewhere, and conversely, revenues and operating profits in the group’s hotels in Malta, Prague, Budapest, Lisbon and London continued to increase year on year, in line with previous projections, and reflecting a stronger capability to achieve a fair market share in their respective markets. In particular, the Corinthia Hotel St George’s Bay and Marina Hotel in Malta registered an improvement in revenue of 15 per cent.
Furthermore, the Corinthia Hotel London continued to consolidate its position as one of the leading luxury hotels in the British capital with an improvement of six per cent in revenue relative to the same period last year.
IHI also pointed out that year-on-year depreciation and amortisation reduced by €2.7 million mainly resulting from the fact that items of furniture, plant and equipment at the Corinthia Hotel Tripoli installed at the time of the hotel’s opening 10 years ago are now fully depreciated.
As far as the London Hotel is concerned, for the period under review, the hotel registered an EBITDA of €4.3 million. This result is not consolidated in the group’s financial statements but reported under equity accounted investments in view of IHI’s 50 per cent share.
The general business outlook for IHI’s hotels in Budapest, Lisbon, London, Malta and Prague remains positive with year-on-year growth being registered in both turnover and operating profits. Another concern which is on the investor shareholders radar is the succession which is on the cards for the founder Chairman and CEO.

 


 

VIPsight Archives Europe - Malta

 

16. September 2013

Re Banks' winding down regime, small shareholders with little say in the way Banks' are run re justifiable ask that what can be salvaged for these small shareholders should feature in any planned EU amendments.
These days the news has been buzzing with the story of the high executives who lost Lehman Brothers and other bottom up Banks and other listed companies yet 5 years down the line are still living lavish lifestyles. In all too many winding down of failed banks the shareholders end up with nothing while vulture funds have rich pickings.

Vodafone shareholders voted by over 75% to buy Kabel Deutschland. In Malta on the other hand the only listed telephone company with Dubai majority shareholding, ignored the small shareholders and invested in Greece, has lost millions and seems not to have learned the lesson but is deliberating whether to invest more against the wishes of the small shareholders who claim that the company is loosing market share in Malta through its unfocused strategy.

Germany wins allies over banking union concerns

Brussels' blueprint for the next leg of European banking union has hit a wall of objections, with Germany winning significant backing for its strong reservations to the plan to centralise the way banks are wound down.

http://www.ft.com/cms/s/f6f95614-1c8f-11e3-a8a3-00144feab7de.html

On August 30, RS2 Software plc announced that the major European Bank referred to in their company announcements of May 16 and June 19, which had expressed an interest in acquiring a significant stake in RS2, was Barclays Bank plc. The company also explained that Barclays agreed to acquire 4,250,000 RS2 shares (equivalent to 10 per cent of the issued share capital) from Information Technology Management Holding Limited (ITM) at a pre-agreed price of €1.22 per share. The agreement was part of a wider transaction for Barclays to acquire up to 20 per cent of RS2.

 

23 February 2013

Midi to sells its shares in The Point through public offering

Midi plc has announced plans to sell its shares in The Point and the underlying car park through an initial public offering.

"The company believes that the disposal of a long-term commercial assets such as The Point through the sale of its ordinary shares in TML is today in the best interest of its business, and hence of its shareholders," the company said in a statement.

The sale, it added, would release significant financial capital back to Midi and strengthen its capabilities to deliver against its current plans by reducing the bank borrowings.

MIDI Group is offering 42.4 million shares and TML is issuing 14 mln shares. This combined offering of 56.4 million shares is all at a price of €0.50 for a total IPO value of €28.2 million

According to a valuation by KPMG and DeMicoli Associates, the assets are worth €58 million.

MSV Life, which holds a 12.55% shareholding, has indicated an interest to acquire 20 million shares in the offering and it is expected that Midi and MSV will enter into a conditional subscription agreement prior to the initial public offering.

Bank of Valletta, which holds an 8.9% shareholding in Midi is expected to underwrite the issue of the 14 million shares.

Midi is to hold an extraordinary general meeting about its plans. The shares are expected to be offered next month.

 

7 May 2012

I note with satisfaction that Joseph Bonett’s quiet but determined stand in support of the minority shareholder, year in year out, at various annual general meetings of public listed companies on the Malta Stock Exchange, has brought a number of equally disgruntled minority shareholders together to form the Malta Association of Small Shareholders.  The European Charter of Human Rights, as well as that of the United Nations among others, guarantees the right to freedom of association and the right to enjoyment of one’s property. It is in the exercise of these rights that the Malta Association of Small Shareholders was founded to stand up to the bullying tactics of the majority shareholders seeing that the regulator either does not take sufficient action, only takes action when prompted by some court case, or worse still tries and stifles the participation of those with fewer votes from contesting for directors of the listed companies. However, contrary to what one of your senior editors Noel Grima stated in The Malta Independent on Sunday of 28 April, Mr Bonett was not the instigator or a participant in the uproar that ensued at the HSBC annual general meeting held on Wednesday 18 April. Several minority shareholders this time stood up for their rights, as they were not prepared to be steamrolled by the HSBC chairman using his guillotine tactics. The Malta Association of Small Shareholders, though a new player, is trying to group together minority shareholders and invites them as well as others sympathetic to our goals to lend their support and help us organise ourselves better to campaign for more just returns on the money we invested in shares. In particular, we would like to call on shareholders to forward their proxy votes to the Association, attend one or other of our weekly Saturday informal meetings held at the Workers Memorial Building, South Street, Valletta at 1.30pm to help the Association secure sponsorships for the newsletter and educational conferences it aims to hold and forward suggestions.

Frans Buhagiar

 

15 March 2012

Today is World Consumer Rights Day, which is celebrated by the consumer movement around the world.

This year is special because it is 50 years since President John F. Kennedy set out a vision of consumer rights and recognised consumers as a group. Since then, the set of rights identified by President Kennedy formed the basis for the eight consumer rights accepted today: the rights to basic needs, choice, information, education, redress, safety, be heard and healthy environment. This year’s theme is again financial services. The reason is simple. After the debacle of the financial crisis some years ago, it seems that the lessons that were learned have now been forgotten. Consumers around the world are getting a bad deal from financial services. A lack of effective competition in the market makes it difficult, if not impossible, for them to shop around. For example, consumers often have trouble understanding different financial products, whether due to lack of information or because the products themselves are too complex, or both. Furthermore, changing to a different provider can be challenging, either because the switching process is prohibitively complicated or simply because there are not enough financial institutions in the market competing to provide better deals. This is also recognised by two European commissioners, Michel Barnier and John Dalli.

Mr Barnier said: “Financial markets should be at the service of citizens, not the other way around. Europe must make financial services more fair and transparent for consumers everywhere in Europe.” Mr Dalli, on the other hand, acknowledged that “consumers are often overpaying for their basic financial services and do not always get the effective redress they deserve. The European Commission has not been passive in the face of this”. In fact, there are a number of projects that will be launched in an attempt to improve the situation in the EU. But what is the situation in Malta?

Though the recent financial turmoil did not hit directly our banking system, thousands of small investors practically lost their life’s savings through the advice they got from “experts” in the financial sector. It is a misfortune that we still lack data of the estimated amount Maltese investors lost through the financial turmoil and we are more disappointed that the banking system seems to be exerting its advertising muscle in the media to stifle any real discussion on this subject. In a recent study by the European Commission covering all 27 EU countries, eight out of 10 mystery shoppers encountered problems when switching financial providers. In Malta, none of the 10 mystery shoppers could successfully complete a switch.

Mind you, the sample of banks selected was based on those brands with the highest share of bank accounts. This goes a long way to show the real deal Maltese consumers are getting from the financial sector. I remember that, some years ago, soon after the introduction of the common principles on banking account switching, I wrote an article where I referred to my own experience. I had visited three branches of the three largest banks in Malta and I asked for information since I was aware that the Malta Bankers’ Association has prepared a leaflet on the subject. I found that none had the leaflet and none of the staff really knew about it. Even after some telephone calls, only in one occasion was the bank able to provide me with a copy of a press release. I also criticised the fact that the prepared leaflet was full of legal jargon and not understandable to the “average” consumer. I was criticised by some people for being too harsh. If anything, the above shows that the situation is still the same. It also shows that self-regulation is ineffective in Malta. We sincerely hope that the World Consumers Rights Day will not be just another day. The Consumers’ Association will continue to press to have a regulator that tells consumers what it does and publishes its investigations, is strong and stands up to the banks and for consumers and promotes competition and is proactive and acts on issues before they become problems.

Financial services revisited, by B. Borg Bonello - The Times, Malta

 

9 March 2012

Malta Bill makes collective action a ‘real possibility’

Malta's Collective Procedures Bill, which is currently in its second reading in parliament, includes the proviso that it will make collective action a real possibility. Although many people may say that this does not affect them in any way, the truth is that this is a good opportunity, as it allows someone to act, even if they do not have a direct interest in the case. This concept already existed in the Constitution of Malta, as it allows for two types of cases; personal action and collective action. The Constitution also lists a number of basic rights, among them enforceable and unenforceable ones. Whilst it is positive to speak about collective action, it should linked to the Constitution. This law sought to create new important concepts, as for the first time we are providing for the right to institute a collective action, which gives consumers and consumers of investment services far greater power.

 

9 March 2012

Malta's Minister of Finance stresses importance of sound corporate governance

Finance Minister Tonio Fenech said that sound corporate governance is an essential ingredient for financial stability, a critical feature in the long-term performance of the economy, and forms an integral part in the development of Malta’s financial sector. Addressing those who participated in Malta's Financial Regulator, which also hosts Continuing Professional Development courses, Malta's Minister of Finance, Economy & Investment (MFEI) said that recent events have placed corporate governance on the forefront of governments, regulators and particularly the media. It is self-evident that sound corporate governance is essential to the well-being of an individual company and its stakeholders, particularly its shareholders and creditors, he said. “We need only remind ourselves of the many financial institutions abroad whose financial difficulties and, in some cases ultimate demise, have been substantially attributable to weak corporate governance. However, sound corporate governance is not just a vital factor at the level of the individual institution. It is also a critical ingredient in maintaining a sound financial system and a robust economy.” Noting that the Malta's financial regulator is placing greater emphasis on the role of corporate governance in promoting financial stability, the Minister said the health of a financial system very much depends on the underlying soundness of its individual components and the connections between them – such as the banks, the investments sector and the payment systems. In turn, their soundness largely depends on their capacity to identify, measure, monitor and control their risks. The MFEI said there are few absolute ‘rights’ and ‘wrongs’ in the field of corporate governance, but some key principles stand out. He highlighted a few basic principles which he said should be given considerable importance:

  • The importance of directors having a sound understanding of their company’s business, the nature of its risks and its strategic direction. This provides the foundation for the sound management of any company. It is absolutely crucial in any investment business;
  • The ultimate responsibility for ensuring that a company’s risks are being properly identified, monitored and controlled lies in the boardroom;
  • The importance of having an adequate representation of non-executive and independent directors on the board, and a clear separation of the position of board chairman and chief executive officer; and
  • A fundamental need for directors to be scrupulous in ensuring that, individually and collectively, potential conflicts of interest are avoided or at least managed in ways that do not compromise the interests of the company.

 

 

20 January 2012

Re transfer of land without commensurate payment from Dubai majority share owned Malta Stock Exchange listed company GO plc to the Maltese state prior to Rating downgrade

I do not know about other telecom users but my experience in trying to exit a contract with GO plc has not been pleasant, despite attenuating circumstances and the contract not having been drawn up at a notary.
However this behaviour GO plc seems to resort to it when dealing with small fry. Otherwise it seems to be falling over itself to give ground to a big cheese, the state, which has asked for and obtained the large tract of GO plc owned land at Qawra, Malta with a vague statement that it was getting in compensation a clear title to the telephone equipment buildings housing its exchanges, when these same buildings had been transfered years back to this company when the Maltese state had sold its golden share stake to the Dubai state holding company TECOM.

J. Bonett

 

1 December 2011

Corporate Governance - Malta Station

A good 'corporate governance' wake up call to Malta shareholders: the Malta Airport Case I found it rather stiff that Malta International Airport (for which the state received millions when it sold off its shareholding) is acting as a virtual 'social benefit agency' to its client airlines by eliminating fees for several months. Fees out of which it generated part of its profit to defray its costs and pay out a meagre dividend to shareholders. Small equity holders amongst which hundreds if not thousands who due to the higher cost of living have for years not stepped on an airplane but who do not even get free parking in winter months at this facility which they part own. Some justice to the small shareholder! And would one need to be a guru to see in this fee elimination a ploy to shore up the national airline and from which other visitor airlines stand to handsomely benefit, with the only empty cap being held by the small shareholders who are not in line for any internal perks or increased pay from promotions to the parent company head office. It seems that horse trading is done best in connection with large flat open spaces and not limited to Marsa.

 

19 June 2011

If I may I would like to add a comment to what was placed at the top of the news items in the 16th June edition of the  International Financial Advisor magazine. It seems that a poorly performing pension scheme by 'the global, local bank',  which is the main rival of the Malta bank, (a listed and one of the top capitalised firms on the Malta Stock Exchange) slapped with a third of a million euro fine, was not taken to court, or slapped with any fine over its poor performing pension scheme which gave abysimal returns to investors. This however did not make the news. A case of international muscle power?

Similarly a non bank financial adviser firm in Malta based in the inner Marsamxetto Harbour locality of Msida which wrecked many an investor's hope of good returns from an investment in a Danish Fund likewise has not been fined anything by the Malta Financial and Services Authority, which when its premises where built destroyed a whole area of fertile grazing land, so much for political correctness and attention to the environment, or is Corporate Governance the mere occasional charitable donation?

Way back in  September 2010 pressure was being exerted in Parliament by the Opposition Spokesman against allowing licensed banks from acting as stockbrokers. Pressure which some concluded would favour the individual stockbrokers and independent stockbroking firms over the Malta bank which has the largest number of qualified and well paid employees and offers investment services from all its branches in contrast with  'the global, local bank' which only offers investment services from a few offices and has been known to push its own investments aggressively to Maltese careful savers.

Malta & Gozo Shareholders Association (MAGOSA)

http://www.international-adviser.com/article/malta-regulator-judgement-in-belgravia-funds-saga

 

10 May 2011

Legislative and Regulatory Developments

The Malta Financial Services Authority Annual Report for last year states that during 2010, the Authority conducted thirty-nine consultations on a variety of legislative initiatives particularly the transposition of EU Directives. Consultation papers were circulated to the financial services industry (but no mention whether same were sent to relevant NGOs) and were also placed on the Authority’s website.

The consultation documents were followed up by feedback statements incorporating comments made by the industry and suggested changes to the proposed legislation. Legislation implemented or under development in 2010 was related to, among others, the Capital Adequacy Directive, Payment Services, Electronic Money, UCITS IV, Contractual Funds, Limited Partnerships, Solvency II, Incorporated Cell Companies and the Trusts and Trustees Act.

The MFSA also signed Memoranda of Understanding with the (People's Republic of) China Securities Regulatory Commission, (the People's Republic of) China Banking Regulatory Commission. (One should keep in mind that Malta was the first European country to be visited years back by a Chinese head when 'China came in out of the cold' after Nixon's recognition of the People's Republic way back in the seventies). Other MoUs were signed with the Australian Prudential Regulatory Authority (as there are more Maltese living in Australia than in European Malta!) and a multilateral memorandum of understanding on co-operation and information exchange of the International Association of Insurance Supervisors [IAIS]. Malta’s stability has not gone unnoticed and in 2010 the World Economic Forum’s Global Competiveness Index put the country at No10 for the soundness of its banks and No11 for financial market development. These figures put Malta in the very front rank of world financial centres and greatly add to our global reputation.

Joseph Publius

 

7 March 2011

The Governor of the Bank of England, Mervyn King reccently was quoted by The Daily Telegraph as issuing a strong warning to those who flaunt corporate governance. He warned Britain risks suffering another financial crisis without reform of the country's banks. He interpreted the sentiments of many business analysts, and not just those in the UK, when he accused banks of "routinely exploiting their millions of customers". He went further in his scracthing criticism when he said: "If it's possible for financial services firms to make money out of gullible or unsuspecting customers, particularly institutional customers, they think that this is perfectly acceptable."

Rather than care of their customers' interests, many bankers aim to "simply maximise profits next week" so that they can then pay themselves huge bonuses. So we often see bankers and others in the financial industry brazenly expect reverential respect from their “gullible customers” and reticence on the part of the media lest the trust that the public puts in them is shattered. No wonder Mr King blames the “payment of bonuses” as part of this cultural problem.

A Financial Times publication, Money Management, in a recently survey published, demonstrated how investors are forking out thousands of euros in fees on their pensions, with many of the worst performing funds charging the highest amounts. Moreover, complaints against banks in the UK have mushroomed in the last several months as more and more small investors are shaking off their inertia and reverential fear to challenge the unfair treatment of banks and financial services providers.

In Malta we are not immune to the worrying reality that for some of our financial institutions profits come before customers. One can understand the limitations imposed on local journalists to conduct meaningful investigative journalism to expose the exploitation of certain classes of customers of financial services providers. But this needs to change if we are to converge with the more advanced EU countries in the protection of consumers. To often the local newspapers just print uncritically press releases from the local banks and financial institutions. At times letters to the editors also do not make it in print as these editors do not want to rock the boat! Thus these same editors are aghast when there is a whiff of censorship at some explicit student publication on the University campus but they themselves behave like the proverbial Spanish Inquistion.

The financial regulators in Malta and elswhere have an important role to play to put the customer back on top of the list of the financial services industry’s priorities. Small investors need to be protected from hard selling tactics used by bank staff who are often rewarded according to the amount of sales they achieve.

The regulators can also protect “gullible or unsuspecting” customers from aggressive marketing aimed at convincing people to borrow money that they probably cannot afford to repay. The property bubble built over the last few years, and in which many more millions is being pumped on, for our small islands, enormous developments which also mar the picturesqueness of our country, can have serious negative effects on our economy if it is not checked.

Banks should extend credit to those able to finance loans for the purchase of their own residence, as well as developers who provide these dwellings. But speculation needs to be kept in check by the enforcements of prudent lending criteria that manage the risks for both consumers and developers.

The small size of our economy in which two or three financial services providers dominate the market exposes us to significant systemic risk. This has often been highlighted by external institutions that regularly review the state of health of our economy. The worst risks are those that we do not know about, or which have been around for so long that we have become complacent about their implications.

 

10 March 2011

Fitch downgrades Malta state chairmaned Bank of Valletta’s long term rating to BBB+

The increase in the bank’s ratio of doubtful loans to gross loans, as highlighted in BoV’s annual report for FY2010, was attributed to the real estate and construction sectors. Although Fitch stated that these are now “showing signs of improvements”, expectations are that loan impairment charges will “remain higher than in the past.” Nevertheless, the rating agency concludes that BoV’s profitability will “continue to benefit from a more favourable domestic economic environment in FY11.”

Fitch has revised Bank of Valletta’s Long-term Issuer Default (IDR) Rating from A- to BBB+, with a stable outlook. The Short-Term rating was affirmed at ‘F2’, the Individual rating at ‘C’ and the Support rating at ‘2’. Fitch explained that this is the result of a “more cautious view” that it is adopting with regard to the level of concentration in the bank’s loan book, “given the small size of the domestic economy.”

The rating agency commended BoV’s “satisfactory profitability, sound liquidity and funding position, adequate capitalisation as well as its position as the largest bank in Malta.” Fitch affirms that the bank’s “funding and liquidity are sound and supported by a large and stable customer deposit base.” The bank’s ratio of lending to deposits continues to be kept “at conservative levels.”

However, apart from an increase in doubtful loans some investors in a Bank of Valletta scheme have suffered terrible losses and even have instituted a court case still pending in Malta's courts.

 

11 March 2011

For want of joining other investors & shareholdes Maltese are loosing millions of euros

To many Maltese in order to save a few euros from enrolling in a volontary non government organisation such as the Malta & Gozo Shareholders Association go ahead and invest their savings on the premise that regulatory authorities within the European Union and in non EU jurisdications keep a tight reign on investments. Unfortunately there are still mavericks in the markets and now and again investors find to their cost that they could have safegaurded better their interest by joining other investors and shareholders to share experience and knowledge but forfeited this laudable practice.

Around 120 Maltese investors have lost over €6 million in a failed Denmark-based currency trading scheme which seems to be a Ponzi scheme. They will have to wait four months for an investigation into the fraudulent affairs of the chief executive to be finalised. In a statement  the Malta Financial Services Authority confirmed it had been carrying out the necessary enquiries with the local financial intermediary based in Msida creek, the MFSP partnership, over the past few weeks.

The Maltese regulator said it had taken steps to ensure that both the authority and Maltese who had transferred funds to EURUS Safe Fund Account 2009 1 A/S, promoted by CECA Invest, were kept updated with developments relating to bankruptcy procedures initiated against promoter Per Norgaard.

“The authority has exchanged communication with the Danish financial regulator and with the official liquidator of the bankruptcy estate of Mr Norgaard, and is currently in direct contact with the liquidator, also to assist to the extent possible, in the process of identifying and safeguarding all assets pertaining to Mr Norgaard, which include a number of Maltese registered companies,” the MFSA said in a statement.

“The authority shall continue to monitor developments in the best interests of the affected Maltese persons.”

Malta's state broadcaster PBS on Monday 7 March reported that scores of Maltese had invested around 50 million krone in CECA, a private Danish company with various investment arms.

Mr Norgaard is under investigation b Danish authorities over the failure of the fund which the Danish press has likened to a Ponzi scheme. Reports claim funds were not invested according to the prospectus and served, instead, to support dividend payouts until the scheme was declared bankrupt at the end of last year.

Over €14 million has been lost in total, half of which belonged to Maltese investors. PBS said investors had been promised returns of 15 per cent.

Mr Micallef yesterday insisted it was too early to jump to conclusions and said that the Danish authorities were dealing with a case of fraud.

All existing investors had been regularly updated with information since December when MFSP Financial initiated legal proceedings, footing a €55,000 bill on behalf of its clients.

Mr Micallef explained EURUS traded in euro and US dollar and all quarterly dividends in the investment period since September 2009 had been received regularly. MFSP also held investments in the scheme which was licensed by the Danish regulator. Last November, however, MFSP became suspicious when delays were encountered in dividend payouts.

Martin Gras Lind, a top Danish lawyer, was engaged to look into Mr Norgaard’s affairs. His findings were handed over to Danish police and a civil bankruptcy petition was initiated against Mr Norgaard and his company.

An the MFSP spokesperson said Per Norgaard had admitted in court that he had falsified and misrepresented company and auditor re-ports.

On February 11, the Danish courts appointed trustee (or ‘curator’) Lars Bentsen to bring to light assets held by Mr Norgaard and hold them in trust. Once the procedure is finalised  Mr Bentsen will be able to establish the value of a list of assets to be liquidated that includes property and cars.

“It is very difficult at this stage in the research to give any sort of indication of what will be recovered,” Mr Micallef added. “These were private investments and a number of other companies have been identified in which Mr Norgaard had a shareholding.

“It is not the scheme which went wrong. What was wrong was the fraudulent decision of the chief executive who, without informing anyone, decided to invest the proceeds somewhere else. He was investing money elsewhere and managed to give the impression for a while that everything was in order by continuing to pay out dividends.”

MFSP stopped transferring funds to the scheme in February 2010 as the intermediary felt that in terms of portfolio management “it was enough of an exposure for this kind of scheme”.

The MFSP spokesperson said his company felt the least it could do was foot the legal bill at this stage so as not to burden local investors further and that it had always acted in good faith and  carried out all the due diligence which was required. The Danish institution was even visited  quarterly by a representative of the Maltese financial intermediary for updates and to meet the traders yet no alarm bells seem to have been dedacted.