I take the cue from the letter to the editor under the title Which Heads Will Roll At BoV? (December 27). On the occasion of the annual general meeting of Bank of Valletta, held on December 16, the chair-man of the bank was quoted saying by The Times that he “would not serve anyone’s head on a platter over the property fund saga”.
What sort of standard does the MFSA apply in interpreting ‘fit and proper’ and ‘accountable’?- Paul Bonello
The general that is responsible for the charge of the light brigade stoically puts himself at the front in order to defend “his men” responsible for the debacle and assumes “full responsibility”. Hence, the first person that should have had the decency to offer his resignation was none other than the chairman himself. Instead, he heroically (or, rather, defiantly) stumbles on as if the bank were a family heirloom.
He pretends nothing of importance really happened and proceeds to promote his immediate subordinate, jointly responsible with him for the bank’s impropriety leading to “unprecedented fines in Maltese regulatory history” (source: the Malta Financial Services Authority’s reply of November 14 to the bank’s application for secrecy proceedings in its appeal against the MFSA directive of June 28), to chief executive officer.
Much more damning than the board’s appointment of the new CEO is the manner in which the MFSA has recently exercised its discretion in approving the bank’s nomination of Charles Borg as the new CEO of Bank of Valletta.
For the benefit of readers, may I remind all that Mr Borg has been a director of Valletta Fund Management since before the launch of the La Valette Multi Manager Property Fund. He was also director during the time that VFM, as fund manager, entered into at least nine speculative investments of a value of about €52 million that breached the investment restrictions of the fund’s prospectus and of which circa €35 million have been lost.
In 2007, after all this mess was consummated, Mr Borg was promoted to chief officer and became head of the bank’s financial markets and investments division.
He continued to act as a director of VFM with all these (and many other) conflicts of interest barefacedly visible to all except the MFSA.
As chief officer of this division, Mr Borg headed the unit of the bank that distributed and sold the La Valette property “investment” to its retail clients and also for the bank’s custodian operations, including that of acting as custodian of the La Valette Property Fund. This culminated in the publication of the sanctions and record fines inflicted by the same MFSA last June 14.
In very similar circumstances, the Jersey Financial Services Authority demonstrated its objectivity and independence in an effective way and ensured that “changes to the senior management team have been made” in response to its investigations and findings pertaining to Standard Bank Jersey Ltd in its role of custodian to Belgravia Funds take place (source: Jersey Financial Services Commission’s public statement of July 27,2010). In an interview published in The Times Business (April 7, 2011), MFSA chairman Joseph Bannister was quoted as saying that “The MFSA will… make sure that persons found responsible for breach of the rules will be held accountable for their acts or omissions”.
In the light of this declaration from the highest MFSA official, I ask: “Who is being held accountable and responsible for the La Valette MM Property Fund “fiasco” and “debacle”, both terms used by the MFSA in referring to the fund when replying to the bank’s appeal against the directive, and for other breaches relating to other securities that have been highlighted?
What sort of standard does the MFSA apply in interpreting “fit and proper” and “accountable”?
Meantime, the Prime Minister and the Minister of Finance, who appoint the bank’s chairman by virtue of the government having the largest single shareholding in the bank and who appoint the MFSA board, out of political correctness, naturally do not interfere!
The author writes in his personal capacity.
The author operates in financial services.