Small shareholders of Bank of Valletta deserve to be given an update of the action being taken over claims that bank officials have been pressured to authorise loans to individuals or companies whose creditworthiness may be in doubt. Obtaining bank loans under false pretenses is fraud, a matter that is serious enough for shareholders and the public to be told of the state of play since the bank took its first action over the claims last January.

At a time when there is so much concern over the growing lack of good governance, fresh cases of wrongdoing, not just in government but also in the private sector, are bound to heighten even further the calls being made for greater transparency and checks and balances to prevent, in so far as this is humanly possible, fraud and malpractice.

The claims about lending malpractice at BoV were first raised by a Nationalist MP, Kristy Debono, in a parliamentary question. According to the information she had, bank officials were being pressured to issue loans to people and companies with connections to persons in power, even though they were not creditworthy.

The bank had immediately asked its internal audit department to go into the claims but, according to what has been revealed so far, the investigations have not been concluded yet. Ms Debono is not happy with the situation since she believes that it made little sense for the bank to task its own audit department with the investigation rather than engaging external auditors.

She has a good point for, once the bank’s internal audit mechanism had, for one reason or another, not flagged the claims, it would seem that the right course of action is to pass over the issue to outside, independent auditors. But maybe the bank has other reasons for not having taken this route. If this is the case, an explanation will be quite in order. The worst thing it can do is to leave the shareholders and the public guessing as to what is happening.

Ms Debono has been reported saying she had names of people and companies that had been given favourable treatment. The inference is that these people and companies did not merit such treatment on commercial considerations. The MP subsequently referred the case to the Malta Financial Services Authority, which in turn told her that the matter was being referred to its banking supervisory committee.

The authority’s chairman explained he was barred by law from divulging any information. This is readily understood in matters of this kind, but surely the bank will be doing the right thing if it keeps the public informed of developments.

As one of the leading banks in the country, it is not surprising for the bank to get to be in the news over matters that may be considered controversial, such those over the huge state-guaranteed loan given to Electrogas for the building of the gas-fired power station, as well as over the €260,000 early retirement golden handshake given to former parliamentary secretary Michael Falzon, and the unsecured loans to cover a shortfall in fuel hedging by Air Malta.

Bank chairman John Cassar White is reported to have said recently that “all the facilities that we grant are subject to the scrutiny of both our internal auditors and external regulators who today include the European Central Bank”. This may very well be so, and there is no reason to doubt the credibility of the people leading the bank either. However, greater transparency over action taken to tackle malpractice claims enhances such credibility.

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