Malta: History Of Banking And Banks In Malta

History of Banking

History of Banking takes us back to 2000 BC, mainly in Assyria and Babylonia where the first prototype banks of Merchants granted grain loans to farmers and traders that were transferring goods between cities. This has continued in ancient Greece and during the Roman Empire where lenders located in temples granted loans and included some changes such as that of receiving deposits and exchange of money. At that time temples were considered as the safest place to store valuable tangible assets.

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During Medieval and early Renaissance Italy, northern cities such as Florence, Venice, and Genoa had already had a modern sense of the term Banking. Merchant Banks, that were the original Banks were invented in the middle ages by Italian grain merchants.

Transformation also took place in Amsterdam during the Dutch Republic in the 16th Century and in London during the 17th Century. In fact, there was an amalgamation between traditional banking functions such as deposits, moneylending, exchange and transfers, and the issuance of bank debt, that during that time served as a replacement for gold and silver coins.

These new banking practices led to commercial and industrial growth by providing prudent means of payment and money supply that quickly reacted to commercial needs. Banking practices has become important for the funding requirements of the European States by end of the 17th Century.

During the 20th Century, there were drastic changes in the operational aspect of Banking due to developments in telecommunications and computing and this has led to an increase in the size of the Banks and to a geographical spread. Global banking and capital market services increased rapidly in the 1980s after the deregulation of financial markets in multiple jurisdictions.

The way banks operated and gained access to capital has drastically changed due to the 1986 "Big Bang" in London. Retail Banks have started to acquire Investment Banks and stockbrokers introduced Universal Banks that offered different banking services.

Between 1980 and 1990 there was a significant growth in financial services due to an increase in demand from governments, companies, and financial institutions. During that time financial market conditions were buoyant and optimistic. Internationalisation of financial markets also occurred during that time.

During the first few years of the 21st century due to the advancement of the process of financial innovation, there was an increase in the importance of profitability of nonbank finance. Financial Crisis occurred in 2007 due to subprime mortgages lending to borrowers with poor credit.

Originally the crisis has started in the United States but effected all the financial institutions around the world as during that time the banking industry was globalised. Central Banks had to intervene by introducing number of recovery measures to stabilise the banking industry as many financial institutions were collapsing.

The banking industry was affected by the global financial crisis and by the September 11 (2001) terrorist attacks in the US. This led to several changes within the industry. Banks have started to collect large amounts of information about customers, channels, financials, and risk and with the help of analytical technology such data could have easily been scrutinised. Importance to security privacy and fraud prevention was given and there were new measures being implemented to focus on these factors.

Globalisation of financial products and services continued to grow with a more focus for the financial inclusion of unbanked, poor and marginalised people. The banking industry also witnessed the emergence of microfinance, microloans, mobile money, and other services that has changed to provide in emerging economies with well grounded and secure financial resources.

The first decade of the 21st Century also witnessed the culmination of technical innovation in banking over the previous 30 years and saw a major shift away from traditional banking to Internet Banking.

History of Banking in Malta

There are many private deeds held at the Public Registry and notarial archives together with Archives of St John in the Royal Malta Library and annals of the Malta Chamber of Commerce that shows that Maltese has always had that kind of entrepreneurial sense on their mind and that commercial activity was already in place.

The first documents available that relates to the Banking industry in Malta takes us back to 1809, that is exactly 9 years after Malta voluntarily became part of the British Empire. During that time there was the formation of Anglo Maltese Bank by Maltese and British Merchants under the Governance of Rear Admiral Sir Alexander Ball.

Three years after this bank has been created, that is in 1812 Banco Di Malta have started doing business. There are sources that refer to this Bank as Banco Maltese. Evidence shows that During the same year, the existence of number of individual Bankers also contributed to the development of the Maltese Banking industry.

A Genoese Merchant, Biagio Tagliaferro through its banking activities in Genoa, Naples, Odessa, and Valletta (Malta) became later a corporate under the name of B. Tagliaferro e Figli. During that period there were others like the family Bank of Josef Scicluna et Fils which in between 1830 and 1890, it had 3 offices in Valletta.

On 4th January 1834, the Malta Government Savings Bank was formed. The Bank's official name was Provident Bank for Savings. Between 1838 and 1848 this Bank operated together with a charitable pawnbroking institution named Monte di Pieta'. The Bank also opened a branch in Gozo on the 1st day of June 1853 and on 1st September 1961 Ordinance No. XXV handed a statutory status to the Bank.

A foreign Currency Exchange Bureau has been formed in 1880 by James Bell and Co, Francesco Ellul & Bros, Turnbull Junior and Somerville, and Antonio Coppini. It is documented that the first customers of the Maltese Banks were port workers, Ship-Chandlers, businessmen, and service employees. Anglo Egyptian Bank Ltd opened a branch in Valletta in 1881. After just five years a manager within Anglo Egyptian Bank got an approval to issue the first Bank's own notes.

During the first decade of the 20th Century, the first phase of Maltese banking was coming to an end. During that time, in Malta, there was the saga of the language, whether to be English, Italian or Maltese.

Banco di Roma opened a branch in Valletta in 1911 and at that time it was offering competitive interest rates to the Maltese to quickly enter the market. This was followed by a French bank Credit Foncier d'Algeri et de Tunisie which also opened an office in Valletta a year or two later. During the second World War, these two banks had to close their branches in Malta.

The Second Phase of Maltese Banking History have started by the end of World War 2. In fact, in 1946 The National Bank of Malta was formed by the amalgamation of the Anglo Maltese Bank and Banco di Malta. Consequently, in 1949, Scicluna's Bank and Tagliaferro's Bank also joined this new bank.

The National Bank of Malta which was considered as one of the leading financial institutions at that time also expanded its branch network and have started to offer more banking facilities to number of new clients. It was also financing number of large projects that were being scheduled in Malta after it got its independence from Britain.

Three-men council of administration has been appointed by the Government in 1973 after the National and Tagliaferro Banks' (Temporary Provision) Act 1973 was passed In the Parliament. The Bank of Valletta (BOV) was set up in 1974 and it took over assets and liabilities of the National Bank Group. It started with its operations on 25th March 1974.

Originally APS Bank has been established in 1910. This was one of the projects setup by l'Unione Cattolica San Giuseppe. Their main intention was to motivate working classes to start saving part of their earnings. The Bank showed a significant growth and became a cost-efficient financial institution, while still was giving importance to personal banking.

It was in November 1947 when l'Unione Cattolica San Giuseppe together with all the branches and the Savings Bank was transferred to the Archdiocese of Malta.

After the Central bank was formed in 1967 a private limited liability company has been incorporated to take over the responsibility of this Bank. The name of the Bank has been changed to APS Bank Ltd in 1990 and it applied for a commercial Bank license which was issued in the same year by the Minister of Finance.

HSBC Malta have started its operations in Malta through the Anglo Egyptian Bank which later on merged with the National Bank of South Africa and the Colonial Bank to form Barclays Bank Dominion Colonial overseas, later named Barclays Bank D.C.O and ultimately Barclays Bank International. Mid-Med Bank was introduced in 1975 after the government of Malta nationalised the operations of Barclays Bank International in Malta. 33% of Mid Med Bank was sold to the Public in 1991 and in 1993 it was listed on the Malta's stock Exchange.

The Bank acquired 25% of Lohombus Bank (specialising in housing finance) in 1995 and it acquired additional 35% by 1996. In 1999 67.1% of direct holding by Government of Malta was acquired by Midland Bank. When Midland Bank rebranded as HSBC Bank, Mid-Med became HSBC Malta Plc.

In 1955 Lombard Bank Malta P.l.c was introduced in Malta, when Lombard North Central of the UK was active in taking deposits in Malta through a number of agents. Lombard Bank (Malta) Limited was registered in 1969 as a subsidiary of Lombard North Central plc. The Bank is now listed on the Malta Stock Exchange and is licensed and regulated by the MFSA.

Conclusion

History has proven that Banks are to be vulnerable to many risks, such as credit, liquidity, market, operating, interest rates, and legal risks. Due to many global crises Banks have been subject to such vulnerabilities and this has led to the strict regulation of state and national banks. Having said that history shows that Banks and other financial institutions were and are still providing security for individuals, businesses, and governments.

In fact, Banks were always considered important to the economy in general and are still involved in economic activities such as issuing money, settling payments, credit intermediation, maturity transformation, and money creation in the form of fractional reserve banking.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.