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NDSF Nominee Faces Regulatory Hurdles

NDSF Nominee Faces Regulatory Hurdles
by
October 26, 2023
in Banking, Finance News
61

One of the two nominees appointed by the National Development and Social Fund (NDSF) to the bank’s board has faced regulatory obstacles. Dr. John Bonello secured regulatory approval for his directorship, but the status of the second nominee, Paul Abela, remains in question. This issue has raised concerns, considering the NDSF’s significant stake in Lombard Bank. Let’s delve into the details.

Lombard Bank’s Regulatory Update

Lombard Bank made a noteworthy announcement on Wednesday via the Malta Stock Exchange. The bank disclosed that Dr. John Bonello had successfully obtained regulatory approval for his appointment as a director. However, conspicuously absent from the statement was any mention of the NDSF’s second nominee, Paul Abela, who also serves as the President of the Chamber of SMEs.

NDSF Nominees for Lombard Bank

Dr. John Bonello and Paul Abela were nominated together by the NDSF back in June to serve as non-executive directors on Lombard Bank’s board. It’s worth noting that the NDSF is Lombard Bank’s largest shareholder, making their nominations of significant importance. Yet, for these appointments to be formalized, they needed the green light from the Malta Financial Services Authority (MFSA).

Challenges for Paul Abela

Following the due diligence exercise conducted by the regulator, it appears that only Dr. John Bonello received regulatory approval. The precise reasons behind the approval discrepancy remain unclear, but sources within the banking sector suggest that the MFSA might have objected to Paul Abela’s nomination due to pending criminal procedures related to perjury.

“Pending criminal procedures would automatically raise red flags at a regulatory level,” said the sources, emphasizing the seriousness of such allegations when considering appointments to important financial roles.

Withdrawal of Nomination and Ongoing Case

In response to these challenges, it is believed that the NDSF has withdrawn Paul Abela’s nomination. However, as of now, they have not put forward an alternative nominee.

Paul Abela’s current legal situation stems from a separate court case dating back to 2010, in which a former member of the Chamber of SMEs, Sandro Chetcuti, faced charges of assaulting then-Director General Vince Farrugia. The initial charge of attempted murder was later amended to grievous bodily harm, and Chetcuti received a suspended sentence for slightly injuring Farrugia, who has since passed away.

However, during the Chetcuti case, it was revealed that several witnesses had committed perjury by providing false testimony. Paul Abela was among the witnesses implicated by the magistrate for perjury. The case against him is ongoing.

NDSF and Lombard Bank

The NDSF, Malta’s equivalent of a sovereign wealth fund, is funded by income generated through the golden passport scheme. In 2018, the fund acquired 49% of Lombard Bank’s shares when it took over the struggling Cyprus Popular Bank. This investment was intended to be temporary, but five years later, the NDSF remains the largest shareholder of Lombard Bank.

In June of the previous year, the NDSF voted in favor of a resolution to issue new shares and increase the bank’s share capital. This action came after the NDSF had previously blocked the board’s proposal in 2022. At the time of the vote, the NDSF was not represented on the bank’s board despite holding the largest stake. Subsequently, the fund nominated two directors.

The ongoing situation with Paul Abela’s nomination underscores the complexities and scrutiny involved in the selection and approval of individuals for key positions in the financial sector, especially when significant financial interests are at stake.

Frequently Asked Questions (FAQs):

Who are the National Development and Social Fund (NDSF) nominees for Lombard Bank’s board, and what regulatory issues have arisen regarding their appointments?
Dr. John Bonello and Paul Abela were nominated by the NDSF to serve as non-executive directors on Lombard Bank’s board. While Dr. Bonello received regulatory approval, concerns have emerged surrounding Paul Abela’s nomination.

What was the official announcement made by Lombard Bank regarding these nominations?
Lombard Bank’s announcement, made via the Malta Stock Exchange, confirmed Dr. John Bonello’s regulatory approval but did not mention Paul Abela’s status.

What role does the Malta Financial Services Authority (MFSA) play in this situation?
The MFSA is responsible for conducting due diligence on the nominees to ensure they meet the necessary regulatory standards for appointments to financial roles.

Why was there a discrepancy in regulatory approval between the two nominees, Dr. John Bonello and Paul Abela?
While the specific reasons for the discrepancy are not explicitly stated, sources suggest that the MFSA might have objected to Paul Abela’s nomination due to pending criminal procedures related to perjury.

Why would pending criminal procedures related to perjury raise concerns in a regulatory context?
Pending criminal procedures involving a nominee can be a red flag for regulators, as they indicate unresolved legal matters that might impact the individual’s suitability for key financial roles.

What action has the NDSF taken regarding Paul Abela’s nomination?
The NDSF is believed to have withdrawn Paul Abela’s nomination, given the regulatory challenges he faces. However, as of now, they have not proposed an alternative nominee.

Can you provide more information about the criminal case related to Paul Abela and the charge of perjury?
Paul Abela’s legal situation stems from a 2010 court case involving Sandro Chetcuti, a former member of the Chamber of SMEs, who faced charges of assaulting then-Director General Vince Farrugia. During this case, several witnesses were found to have committed perjury, with Paul Abela being one of the individuals implicated by the magistrate.

What is the National Development and Social Fund (NDSF), and how is it funded?
The NDSF is Malta’s equivalent of a sovereign wealth fund and is financed by income generated through the golden passport scheme. The fund acquired a significant stake in Lombard Bank in 2018.

How has the NDSF been involved with Lombard Bank prior to these nominations?
In the past, the NDSF had blocked a board proposal in 2022 but subsequently voted in favor of a resolution to issue new shares and increase Lombard Bank’s share capital. This action was taken even though the NDSF was not represented on the bank’s board at that time.

What does this situation highlight regarding appointments in the financial sector, especially when significant financial interests are at stake?
The situation with Paul Abela’s nomination underscores the complexity and scrutiny involved in selecting and approving individuals for key positions in the financial sector, especially when major financial interests are involved. Regulatory diligence and legal considerations play a vital role in such appointments.

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