Bank of Valletta is drafting contingency plans in case it loses its final US dollar correspondent banking partner and hopes to reach a settlement in a major litigation case that has hamstrung it for years.  

Briefing the press on Tuesday, BOV chief executive Rick Hunkin said that a number of alternative options to US dollar correspondent banking are being explored, but conceded that these would not be straightforward.  

A correspondent bank is typically used in international buy, sell, or money transfer transactions to facilitate foreign currency exchange and payments.  

BOV’s remaining US dollar correspondent banking partner, Austria’s Raiffeisen Bank International, plans to terminate its relationship with the Maltese bank by March 2021, after Dutch bank ING cut ties with BOV as Malta was considered too risky to be worth serving. 

Waiting for Moneyval

Hunkin on Tuesday said that Malta’s poor showing in a review of its anti-money laundering regime by the Council of Europe’s Moneyval was playing a big part in this. 

Many potential partners, he said, were awaiting the final outcome of the review and whether Malta will be put on a list of countries that are not doing enough to fight financial crime.  

Malta, Hunkin said, had faced some bad press in recent years and this made potential business partners nervous.  

That said, Hunkin said the bank was being proactive and holding direct meetings with partners. 

“I would say we are hopeful/confident that we will resolve this,” Hunkin said, adding that the bank was also discussing with its clients that deal in US dollars to consider trading in another currency too.  

Litigation woes

Another major issue on the bank’s radar, the chief executive said, were a number of litigation cases that for the past few years have “hung over the bank like a shadow”.  

The bank had faced three core litigation cases. The first was an issue with the Valletta Property Fund which has since been addressed and which Hunkin said had been “relatively small”. 

Another dispute was with the Swedish Pension Agency which had claimed to have suffered €88 million in fraud. Hunkin said BOV had reached a settlement of €26.5million to resolve this.

The final remaining litigation case involved the now-defunct shipping company Deiulemar. 

Deiulemar shareholders were found guilty of fraud and in 2014 seven members of the company’s founders were jailed by an Italian court. BOV had taken over a trust that held €363 million in the company’s assets in 2009. When the company went bankrupt, bondholders whose savings were wiped out turned to BOV. 

Hunkin said BOV had been working hard to resolve this and he wanted to reach the same conclusion as had been negotiated with the Swedish pension matter.

“It is our view that there is no strong case against the bank and we are working very hard to resolve this,” Hunkin said.  

The chief executive was giving an overview of the bank’s new strategy plan which stretches to 2023. BOV, he said, plans to hire some 200 new staff and will not be slashing and burning its network of more than 40 branches as it transforms the bank to a “future proof” institution.  

Hunkin said the strategy document looked at ways to deal with the bank’s excess liquidity, moving to invest these funds in a wide way.

“We won’t be making any big bets, but want to address the issue of excess capital in every way but loose,” he said.   

De-risking the bank has helped it move away from sectors which may have posed problems. 

Hunkin said that over the past two years the bank had closed around half of its high-risk accounts in an exercise to limit its exposure.  

BOV’s anti-money laundering capabilities had increased by more than 15-fold when compared to just a few months ago, he said.