It was the summer of 1999 when the Maltese government sold its 67.1% stake in Mid-Med Bank, to a member of the HSBC group for roughly Lm91 million – around €200 million at the time.
The deal had been brokered by then-finance minister John Dalli, although opponents to the deal were highly critical of the move. The deal, according to Dalli, was supposed to place Malta on the international financial map and bring a quantum leap in the banking sector in Malta. 25 years later, the bank could be heading for an exit.
On 11 September, HSBC announced that it will carry out a strategic review of its shareholding in its Malta subsidiary. This review could take months, but if there is any truth in the speculation that finally forced through a slew of company announcements, it is the small Church-owned bank APS that is gunning for the buy.
Apart from concerns on APS’s financial firepower to buy HSBC Malta, the question on people’s minds is whether it is an acquisition that, in leaving Malta without an international bank and its correspondent banking muscle, would not be in the country’s strategic interest.
Philip von Brockdorff, a professor of economics, feels that it is in Malta’s interest to attract a foreign bank of international repute, particularly due to the fragmented nature of Europe’s banking sector. “The preferred option is to attract a reputable foreign bank, including second-tier banks, but the problem is the size of the market. It is just too small to generate interest, and with the regulatory framework being what it is, that interest might not materialise into concrete offers,” he told MaltaToday.
He warned that, in finding a suitor acceptable to HSBC, one should take a regulatory and economic perspective. “[This] is especially important given the economy’s dependence on sectors such as tourism, gaming, construction and real estate. Such sectors may not always be the areas in which established foreign banks have an interest.”
MaltaToday also asked former prime minister Alfred Sant for his views on the matter. Back in 1999, Sant was heavily critical of Mid-Med/HSBC deal, particularly due to the price it was sold for. Years later, he doesn’t quite see what the benefits of HSBC’s presence in Malta have been.
“Due to its size and its structure the Maltese economy is cocooned from the international financial system, with most government debt funded locally which makes it manageable, no matter how it grows. As for private sector finance, I fail to see how the HSBC presence has really been of benefit as compared in the past to the profile of Mid-Med vis-a-vis the problems of correspondent banking over the last few years.
“So no, even if this is a heretical view, I’m not too concerned if there’s no (big) foreign bank operating out of Malta, provided that there remains at least a well-regulated and stable ‘big’ banking duopoly with other smaller banks on the side.”
Like Von Brockdorff, Sant agrees that the local market is too small to attract the interest of big international banks. “Any bank that is interested to come here will do so to achieve some short-term, sharp gains that then soon come to be considered marginal – as has been really the HSBC experience in Malta.”
