Lehman crash 'cost BOV 0.5% of portfolio'

The crash of financial giant Lehman Brothers has cost Bank of Valletta around 0.5 per cent of its investment portfolio, sources told The Times.

The news comes after the bank refused to disclose its exposure to the bankruptcy two Sundays ago of the US investment bank Lehman Brothers. The bank made a public announcement the following evening, saying it had interests in Lehman but that the collapse was likely to have a "modest impact" on its performance.

After that, however, it refused to elaborate further and give an actual figure.

The Times asked the Malta Financial Services Authority to comment on whether this limited level of communication in the circumstance is acceptable but all a spokesman would say yesterday was that the authority is "considering a response in the light of the evolving scenario".

Informed sources in the financial sector say the exposure really adds up to about half a per cent of the bank's total investment portfolio even if they were reluctant to give an actual figure.

A spokesman for the bank yesterday insisted on giving no further comment, saying that the bank said what it had to say in the announcement it made on Monday, September 15.

The bank has been running on the advice, the same sources said, that even though marginal, the impact might get people jittery. Ironically, the bank's shares still plummeted 17 per cent after the announcement but it only turned out to be a temporary blip as they recovered in a matter of days, in line with more buoyant moods on the international markets.

In a statement, yesterday, the government reiterated that an analysis carried out by both the MFSA and the Central Bank of the exposure of all local financial institutions in banking, insurance and investment services, shows that the impact of the crash is "minimal and manageable".

The statement said Finance Minister Tonio Fenech is satisfied that Malta's financial services laws are being respected and implemented and that turmoil in overseas markets and institutions is being properly assessed and managed.

At a micro level, consumers of financial services should continue to be mindful of their rights to clear disclosure from financial intermediaries on how the current international scenario could impact their investments, the statement said.

The MFSA was asked whether other financial institutions were exposed to the recent international finance rollercoaster which included the $85 billion bail-out of insurance giant American International Group (AIG) by the US treasury, but again no response has been forthcoming so far.