Fit but not proper

"The news that HSBC was fielding its candidate for the Bank of Valletta board of directors' elections was surely surprising. HSBC shareholders must have been as dumbfounded, by the news, as those of BoV.

However, on the face of it, there is nothing in the form of rules and regulations to prevent HSBC's attempt to infiltrate into its main competitor's boardroom, just as BoV is free to field its candidate to endeavour to seek a seat on the board of HSBC.

Having said this, I find it appalling, both as a shareholder in the two banks, and as a retired senior bank executive and former non-executive bank director on the board of HSBC, to witness such behaviour within our banking and stock market set-ups.

The contestant mentioned in a section of the media is no doubt 'strong' in his own right, and definitely does not lack the right connections. In addition, it is expected that HSBC's rather substantial voting power in Bank of Valletta would be put to good use to support his candidature.

Also, HSBC's Fund Management subsidiaries, together with other smaller fund management 'family' set-ups, must hold yet other substantial slices of the BoV's equity, which, put together, would go to further strengthen the chances of the HSBC man winning a seat in the competitor's boardroom.

Such a situation, certainly, does not favour the private shareholders of either of the two institutions. It is neither healthy for the well being of our banking industry, nor for the local stock market.

I have serious doubts whether the contestant nominated for the BoV board would feel truly at ease with himself, and with the private shareholders of both banks, should he eventually sit on the boards of the two leading rival institutions.

What is substantially wrong in the local stock market scenario is, to a great extent, the way the Code of Good Corporate Governance was finalised by the Malta Stock Exchange, and subsequently revised by the Malta Financial Services Authority.

Had both these authorities given some thought and cared to give consideration to the Malta Shareholders Association's recommendations at the time of the drafting, and more recently, at the time of the revision process of the Code, such a situation would have been less likely to arise.

I honestly feel that the stock-broking firm that nominated the contestant, and more so HSBC Bank that seconded the nomination, went totally overboard in the exercise. It would have been more appropriate for the HSBC board of directors to oppose the candidature of their colleague rather than bless it.

The alternative for the HSBC board was to ask the member concerned to resign his HSBC appointment, if he was so intent to pursue his new objective.

I truly cannot conceive how being a member of the two rival banks' boards could permit one to keep the two allegiances separate, when the two institutions are consistently endeavouring to get the better of the other one, in their line of business. Hence, this automatically renders the two roles conflicting, at least, from a business point of view.

The onus rests with the MFSA for it has the responsibility to conclude whether to certify the contestant as being 'fit and proper' to contest the directors' elections.

In my judgment, the candidate in question is surely 'fit', but definitely not 'proper' for the post under consideration. The ball is now in the MFSA's court; one has to wait and see.

This undesirable situation that came to the fore makes it even more apparent that the country needs a strong investors' association, to cater for the interests of private investors generally, and to carry on with the good work done by the then shareholders' association, and before it, the association of private investors of Mid-Med Bank plc.