Agribank customers are now covered by depositor scheme
Schemes in the EU had to build up
and it is no secret that they were not
deep enough to cover all the deposits
of all the banks.
“The government was afraid to put
any more stress on the local scheme,
so it decided to put us and other banks
‘on hold’. Was it discriminatory? Did
the MFSA have the right to keep us
‘on hold’? We knew before we got the
licence that this would be the case – so
to be fair, it was not a surprise. But it
did not mean that we were happy!
Agribank customers are now covered “We were in an awkward position as
by the MFSA’s Depositor Guarantee we were licensed to sell products but
Scheme, two-and-a-half years after the our customers would not have been
covered by the scheme if we were to
bank got its licence.
collapse,” he explained.
Agribank was one of a handful of
banks which were licensed in Malta Agribank made the initial contribution
around 2012 – when the scheme was to the fund – a flat fee of €20,000 –
which meant it complied with the law
still building up. The MFSA at the
that says banks must be part of the
time decided that none of the new
banks would be immediately covered scheme. But it did not pay the regular
contributions based on its eligible
by the scheme.
depositor base – and its depositors
“When the crisis hit in 2008,
governments introduced the schemes were not covered by the scheme.
It was an unprecedented and
to cover the first €100,000 worth of
deposits, in an effort to build up trust anomalous situation, and one which
made it into the foreign media. The
in the financial system.
Guardian columnist Patrick Collinson
“But the Deposit Compensation
wrote an article on the “bizarre
banking loophole that has opened
up in Malta”. He also quoted from
the MFSA’s response to his queries:
“On May 16, 2012, the MFSA issued
a policy under which it prohibited
or limited any newly licensed credit
institutions from creating undue
liabilities on the local deposit
compensation scheme”.
“I do not know of any other
jurisdictions which acted this way,”
CEO Roderick Psailasaid.
“We have a very risk-averse business
model – we lend to British farmers,
who are very asset-rich and who have
extremely low defaults. And we use
deposits to fund our advances. So at
first we decided to go ahead with the
launch of our first deposit products in
March 2013, making it very clear to
our UK customers that they were not
covered by the scheme. We felt that,
if the interest rate was a bit higher,
it would be attractive enough for
customers to accept the additional
risk. They were an instant success but,
even though customers were told that
they were not covered and accepted
it in writing, there was always the
possibility that it could be challenged.
Just five weeks later, we decided to
‘stop’ their take-up by changing the
terms and conditions which made
them very unattractive to customers,”
he said. “It was a kick in the teeth,” he
admitted bitterly.
The bank, which works exclusively
through price comparison websites,
found itself in an awk ard position
w
with regards to its customers, but
even more so with regards to its
operation. It had already committed to
premises in Skyparks and had taken
on staff. With ut a product to offer,
o
the bank’s deposits were more or less
mothballed.
Without deposits, it had to sustain its
loans through much more expensive
wholesale funding from a London
bank – and the losses mounted,
reaching over £300,000 in 2012/2013.
However, last year, it reported a profit,
albeit a small one.
In January, it managed to reassure the
MFSA that it was robust enough, and
was added to the scheme. It is now
finally able to go to market again,
offering various deposit products and
is planning to add two more staff to its
current complement of 12.