BOV agrees to more property fund payouts

Bank of Valletta yesterday declared it would be compensating in full a group of inexperienced investors who were found to have been wrongly sold shares in its high risk property fund which failed in 2008.

The bank had previously refused to pay any more compensation to investors who accepted its one-off settlement of 75c per share last year.

Now, it has declared it will supplement the settlement with another 25c per share in the case of investors found to have been victims of so-called mis-selling. The decision comes after the Malta Financial Services Authority earlier this month announced the findings of its last investigation into the bank’s handling of the La Valette Multi Manager Property Fund.

The bank was ordered to pay more than €200,000 and give inexperienced investors additional compensation. The bank said yesterday that it would be appealing the authority’s directive to pay compensation to some investors, claiming that the MFSA was not in a position to give orders. Notwithstanding, the bank said it would pay the compensation to settle the matter.

It said it wanted to “avoid the prospect of an extended adversarial regulatory dispute with the authority and to allow senior executive management to focus exclusively on the bank’s business, particularly in these challenging times.”

Stockbroker Paul Bonello, who spearheaded the shareholders’ efforts to hold the bank accountable for the fund’s failure, described the bank’s decision to pay as “intellectual arrogance”.

He said they were “playing the high moral ground when they have none, as if we have to tell them thank you now for compensating us for their error. You earn respect and they have not earned it. That is what they have to realise.”

Following the fine, the bank said that there were “valuable lessons to be learned” from the property fund experience.

The dispute with investors started after the fund failed when investments were made in high-risk sub funds that went bust. The bank suspended trading in the fund’s shares in August 2008, leaving investors high and dry.

The MFSA has appointed an independent firm to establish how many inexperienced investors there were. Of the 2,200 or so investors in the fund, Mr Bonello estimated about 1,000 might fall in this category.

He pointed out that about 100 of these were people who were illiterate in the real sense of the word and not just financially illiterate.

The bank said it was ready to fully cooperate with the review of all customer files to see if there were any inexperienced investors and would do its best to ensure that the process was finalised and further compensation paid by the end of this year.

Mr Bonello said that the bank’s “arrogance” stood out in comparison with the behaviour of British banks, which “have the decency, in all cases, to say: ‘Sorry, Mr Investor, we will compensate you. We will do our best not to do it again’.”

A few weeks ago, Mr Bonello, a harsh critic of the bank over the fund debacle, was outraged after he was notified by BOV that his credit cards and the financial instruments held by his investment consultancy group would be terminated.

New office in Brussels

A representative office of Bank of Valletta in Brussels was yesterday inaugurated by Prime Minister Lawrence Gonzi.

Dr Gonzi said this was not only a milestone for the bank but for Malta too because despite a period of “considerable stress”, the island’s banking sector projected a message of resilience, strength, vision and growth.

The office is hosted within the headquarters of the European Savings Banks Group at 11, Rue Marie-Thérèse/Maria-Theresiastraat. BOV has been an active member of the group for the past 10 years.

The opening of the office brought Europe and its opportunities closer to the Maltese private sector, the Prime Minister said.

Europe, he stressed, offered enormous opportunities despite the challenges the world was facing.

Dr Gonzi added that joining the EU internal market and adopting the euro had helped Malta project itself as a sound and attractive destination for foreign investment and opened up opportunities for Maltese entrepreneurs.