How to raise a bank’s capital tenfold… in less than two months
Former Central Bank Governor Francis J.Vassallo has been recently made Chairman of Mediterranean Bank after its operation was passed on to new owners in August. He says private banking as we know it is still virgin territory in Malta. Interview by DAVID DARMANIN
At Francis J.Vassallo’s office in Valletta, two LCD screens are hung on a wall to project wide-angle views of the Grand Harbour - taken from high-definition cameras installed on the rooftop of his office block in St Paul’s Street.
“I had to have my windows removed since they overlooked a neighbour’s terrace,” he said as though justifying the peculiarity of this feature. While he was at it, he zoomed into the aft of a tug that was making its way to the port. “Look at the detail, you can even see the name of the vessel, and even where it was registered,” he said.
No doubt, Vassallo is not the type of man who would allow any detail go unnoticed.
For 25 years prior to 1993, he occupied various senior posts with Chase Manhattan Bank – where he was board member of several of its subsidiaries in Luxembourg, the Channel Islands and Spain. Between 1987 and 1991 he was general manager of Chase Manhattan in Spain, while he was responsible for the setting up of private banking as well as the capital markets in Spain. He was also General Manager of Chase Private Bank Switzerland until September 1993 – when he came back to Malta to be appointed governor of the Central Bank, a position he held until 1997.
“Throughout the period I was governor, I was very much involved with former finance minister John Dalli in the restructuring of Malta’s banking and financial system,” he said. “Much of what you see today in Malta’s financial sector is the result of efforts undertaken by myself and the Minister during those years of reform.”
Vassallo spearheaded various legislative changes in preparation for Malta’s entry into the EU, including the new Banking Act and the amended Central Bank Act. He assisted in the preparation of the legislation on the Investment Services Act and Capital Markets, along with the enactment of Anti-Money Laundering Legislation in Malta.
He is the President of the financial and tax consultancy firm Francis J. Vassallo and Associates, as well as a member of the Board of FIMBANK plc and is a Director on various other companies including United Group and the public listed United Finance plc. Vassallo is a Director of Celsius SICAV (Barclays Bank), ALTMA, NBCG (National Bank of Canada) and White Rock Insurance (Europe) PCC Ltd. He was Chairman of the Malta Development Corporation until October 2000 and was until July 2009 Chairman of BAWAG Malta Bank Ltd.
Last September, he was appointed Chairman of Mediterranean Bank – a recently formed institution specialising in private banking.
“It so happened that last December, I learnt that Mediterranean Bank was looking for new owners as it was risking closure – due to the wrong reasons… nothing to do with the financial crisis,” he said. “I put myself to work, and within two weeks, I started discussing with AnaCap (a UK-based private equity firm) for the eventual takeover of the bank.”
Once the deal with AnaCap went through, the new owners started looking for a Chairman with vast experience in private banking.
“They approached me with the offer and I gladly accepted – mainly due to the fact that the bank’s new business plan perfectly coincided with my thoughts on what should be done in Maltese banking.”
During Vassallo’s last ten years at Chase, he was responsible for private banking operations in Europe from an office in Geneva.
Is private banking virgin territory in Malta? Is it a booming market?
“Private banking as we know it is still virgin territory in Malta,” he said. “The closest service to private banking in Malta nowadays is offered by stock brokers, but private banking is not just about managing the money of some wealthy individual – it goes beyond that. Private banking also means estate planning, succession planning and maximizing the needs of a client whose risk money is based in a company, but needs the service of specialised individuals to take care of his personal wealth. This does not only span into stocks and bonds. It goes beyond the inclusion of some sort of investment banking. In the international market, the advent of family offices was a reaction to a situation where private banks were not fulfilling the needs of wealthy individuals.”
The top management of Mediterranean Bank today is made up of some big names. Mark Watson, the CEO, was head of securities at CT Bank. Henry Schmeltzer, a lawyer by profession, is COO. His experience is wide-ranging, and was involved with UBS among others. Joachim (Ximo) Vicent is a top security trader. He’s the head of trading at Mediterranean Bank.
“The people running the bank are world authorities in the field,” Vassallo said.
Frederick Villa – the former CEO of the bank is now Head of Wealth Management.
“The team is lean and very hands-on. Mark, Henry and Ximo will take Mediterranean Bank to new heights and make it important both to Malta as well as to the Eurozone. The bank management is not made up of traditional employees. They are also stakeholders and therefore the confidence they give to depositors is second to none. We run the bank on a day-to-day basis. Management is highly involved in the everyday operation.”
Mediterranean Bank was set up four years ago by four individuals who had vast banking experience in Lugano. Their idea was to run a Swiss-style private bank in Malta but it didn’t perform well.
The new management took over the bank only a month and a half ago, and in this short time it has managed to raise the bank capital to €50 million from €5 million.
“We have already broken even,” Vassallo said proudly. “Our investment strategy is extremely conservative and looks at high quality assets, focusing on taking opportunity of the high yields as a result of the financial crisis. The philosophy of the bank is also to allow the clients to participate in the high returns that the bank is earning. This is what I call an investment bank concept.”
In the meantime, Mediterranean Bank is working hard to build a larger client portfolio and to bring back clients it had lost while the bank was facing times of trouble.
“A lot had left,” he confirmed. “Our client-base is still very new, and we are still building it up. Our client portfolio is made up of 120 individuals, most of whom foreigners, although there are some Maltese clients and we hope to attract more. I believe that Mediterranean Bank will bring a new dimension to Maltese banking in offering very attractive market rates to clients. It should not be the market that takes advantage of clients, but vice-versa.”
Mediterranean Bank only employs 15 people as “it is a bank that looks for quality rather than quantity.”
Due to it attracting money from foreign markets to Malta, Mediterranean bank is expected to contribute substantially to the fiscal system, but also to add value to the Maltese economy.
“Maltese banks nowadays largely depend on Maltese money,” Vassallo explained. “This bank on the other hand, will take advantage and pay a better rate because, thanks to the fact that we are in the Eurozone, we can attract international money to Malta. At the moment, the added value that this bank can kick back into the local economy is quite substantial but moneys need not be reinvested in the local economy as this may eventually lead to inflationary pressures.”
The bank does not offer the services of a cheque book account, as it is focused on providing a wealth management service.
“We will reach out to whoever has money to save. We do not loan money, even though we can do it against savings. What I mean to say is that we are not a commercial bank, so the risk elements are very negligible.
“We want to be a main player in Malta, and in the short time we’ve been operating under new management, we already rank in fourth place. What we need to do now is to further build up our clients base and in turn offer even better yields so that the bank can confidently move on to being a main player internationally, and not just in Malta. The people running it are already major players in the international market, so we don’t see why the bank should not be the same.”
Asked to explain what motivated him to take on the post, Vassallo said he accepted Mediterranean Bank’s offer to stand in as Chairman because its business plan and its philosophy are all for the protection of depositors.
“As a former Central Bank governor, I was responsible for the resources of the country. When I took over we managed to increase the resources of the country by investing in top quality assets. This is very similar to the philosophy of Mediterranean Bank.”