Why the NBM case was NOT like the 2008 subprime crisis http://www.maltatoday.com.

mt/en/newsdetails/news/national/National-Bank-of-MaltaWhen-the-Central-Bank-played-a-central-role-20120521

POSTED BY: Jeremy Cassar Torregiani 23/05/2012 11:33:00 Following our independence in 1964 getting people to invest in Maltese economy was not easy. The understanding between Maltese investors at the time and government was one of partnership where the duties of the government in that relationship were crystallised as laws through the CBM act of 1967. It was on the basis of this understanding that the original investments into our independent economy were made. Once the run on the NBM started, law abiding investors looked to these same laws that had offered them the necessary protection. Instead of honouring its side of the bargain, [Mintoffs] government abdicated its legal responsibilities, and enacted subsequent legislation that ran counter to both our constitution as well as the laws of the land in force at the time to achieve its aim as explained here http://www.maltatoday.com.mt/en/newsdetails/news/national/National-Bank-of-MaltaWhen-the-Central-Bank-played-a-central-role-20120521 Comparing this scenario to what happened to sub prime mortgages where people actually started to default en masse triggering a credit crunch is completely different and wrong. In fact it is a lie that cannot be allowed to prevail. Another point to keep in mind is that no matter how great the withdrawals the capital of the bank remains unchanged as the liabilities are decreasing by the same amount. This is why the Central Bank performs this function as in the end by lending a commercial bank the necessary liquidity, the money pumped into the commercial bank would be offset by a decrease in the commercial banks liabilities so that the overall position of the commercial bank remains unchanged. Once the run subsides the CBM would then look into the capital adequacy ratios and ensure that the commercial bank is in line with the policies and laws at the time. Capital only comes into it if and when loans that are due are not repaid. This is what the government later tampered with once it took control. By increasing the provision for bad debts by 300% it made it seem like the

capital was eroded. Not only was this unfair as it was an assumption being made into the future. The truth shows that 78% of these provisions were recovered in line with what the NBM had forecast in its 1973 interim accounts. Penalising the original investors who put their own reserves into the Maltese economy is an act of betrayal towards our own citizens. It is a shame and a stain on our history, culture and heritage and it needs to be rectified so that we can grow into a mature state where its citizens are not blinkered into believing what they are told but where people look for the truth and can admit it when mistakes are made to the detriment of the innocent.