BOV says 'progress' being made in making new USD correspondent banking arrangements

BOV’s last remaining US dollar correspondent bank, ING, due to terminate services in December, but bank says work to make alternative arrangements has progressed

BOV said its work to find new alternative US dollar correspondent banking services was 'progressing well'
BOV said its work to find new alternative US dollar correspondent banking services was 'progressing well'
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Bank of Valletta has said that its efforts to find alternative US dollar clearing arrangements have progressed, despite the inherent difficulties caused by Malta’s small size.

BOV said it had evaluated “a number of options” and the work to establish new alternative correspondent arrangements was “progressing well.”

In an interim directors' statement on Monday, BOV said this was being achieved “despite the challenges that smaller jurisdictions, like Malta, face since they lack the critical mass which would attract the larger players.”

The bank said it would become a direct SEPA participant on 19 November 2019. 

In June, ING - BOV’s last USD correspondent bank - said it would be terminating its services to the Maltese bank on December 14.

ING’s decision came after the Dutch bank embarked on a de-risking strategy since being fined €775 million last September, following its admission that criminals laundered money through its accounts.

At the time, BOV said it had intensified its efforts to engage alternative correspondents to “minimise any possible operational disruption to its business and its clients”.

Deutsche Bank had terminated its USD correspondent banking relationship with BOV over two years ago.

Q3 July to September financial performance in line with expectations

BOV said its financial performance for the third quarter of the current financial year was broadly in line with expectations.

The results reflect the cost impact of the transformation programme, aimed to lower the group’s risk profile and ensure its long term sustainability, which was embarked upon earlier this year.

The main drivers affecting the results for the quarter were:

  • Net interest income, which is marginally higher when compared to Q3 last year, includes the positive impact from volume growth in the loan book and the continuing preference for very low yield deposit products. This was offset by lower returns on treasury investments where the margin remains under pressure due to the negative interest environment and high liquidity levels.
  • Commission and trading income register a slight improvement. Efforts to seek alternative revenue sources to mitigate the impact of the de-risking initiatives and competitive pressures are yielding positive results.
  • Higher costs attributed to the transformation programme as well as the continuing investment in HR and IT.
  • Lower impairment provisions reversals.

 

Total assets are marginally higher when compared to June 2019. Demand for credit, both retail and business, remained satisfactory.

The quarter under review saw a further reduction in deposits from international corporate clients as the de-risking initiatives progressed. Growth in deposits from local customers, both retail and corporate, continued unabated mostly in demand deposits.

The advances/deposits ratio remains at 44.6% is in line with the June 2019 level. Liquidity levels remain high with short term funds exceeding the €4 billion mark.

The bank said it continued with its capital optimisation plan and the capital ratios continued to register improvement.

The bank’s Asset Liability Management Committee actively manages the balance sheet and monitors key ratios on a regular basis.

As was outlined in the publication of the FY 2018 results, the bank said it is actively seeking to raise additional Tier 1 Capital by the end of the year which will further strengthen its regulatory capital.

BOV Group continues with its 2020+ vision

BOV said that its company announcement of the 3 September had informed the market that the term of office of its CEO, Mario Mallia, was due to expire at the end of this year and that Mallia had informed the Board that he will not be seeking to renew his contract.

The appointment of the new CEO is subject to regulatory approval.

The bank said the BOV Group continued on the journey outlined in its 2020+ vision.

During the period under review, bank-wide training for the Core Banking IT system has intensified.

The business restructuring programme has been incorporated in the wider reach of the transformation programme.

This programme, for which the bank has engaged the assistance of two global consultancy firms, covers a number of specific streams, mostly relating to governance and risk management and is primarily aimed towards the strengthening of the bank's regulatory capital position, lower the risk profile while ensuring long term viability in line with the group’s primary strategic priority.

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