Will the truth about what is going on with regard to ‘lending malpractice’ at Bank of Valletta ever emerge? And, perhaps more to the point, if it does, would anyone believe it?
Unfortunately, this is not a simple case of political jibes. It matters to us all. BOV is a bank of systemic importance, supporting more than half the Maltese economy. It hardly helps that the other main bank in Malta, HSBC, is currently struggling to reverse the decline in profits, returns and morale under its former CEO Mark Watkinson.
And the context is not limited to banking. The country is struggling to fight its corner with regard to changes to taxation being pushed by the OECD, the G20 and the European Commission – and make no mistake, if we are forced to change the current imputation system, it would be nothing short of a catastrophe unless our political parties manage to pull the same rope to ensure it does not hang us.
And this is certainly no time for cheap jibes against the chairman of the Malta Financial Services Authority, Joe Bannister, particularly if their motivation turns out to have been spurred by a sore loser.
Nationalist MP Kristy Debono first made claims about lending malpractices in Parliament last January. BOV asked its internal audit to investigate and in early April its interim report showed that it had so found “no evidence”. She scoffed, saying that it “left much to be desired” as it did not look into individual files.
The bank’s CEO, Mario Mallia, although only recently appointed, is the bank’s long-standing expert on risk, and he wrote an opinion piece to explain how the claims being made by Ms Debono were simply not possible because of the safeguards in place, both within the bank and externally.
He referred to dual filters introduced in 2014 which looked at not only the business case of loan applications but also the risk involved. He pointed out that the bank’s operations were scrutinised by the MFSA, the European Single Supervisory Mechanism, the European Central Bank and the Joint Supervisory Team.
He said the allegations had been forwarded to its external auditors, as well as to the local and European supervisors, but Ms Debono is standing by her claims, although she says that she cannot reveal her sources.
One thing is clear. If BOV or any bank gives inappropriate loans, these may not surface for a while. Loans do not go bad on Day One. They would start off well but start to show cracks years later. But if the business case is not sound, and the risk is too high, make no mistake, they will go wrong. And you can rely on the fact that each and every bad account will be examined during the routine Asset Quality Reviews. And you had better believe that anyone involved in that loan will be called to task.
If there really are inappropriate loans being given to people or companies with dubious creditworthiness, whether because of their political creed, the economic impact of their projects, or their affiliations, all those involved would do well to remember this and come forward. Whining to Ms Debono who can hide behind parliamentary privilege is not going to save them. Whining that they are afraid of coming forward is not going to save them. There is the Whistleblower Act and the MFSA could investigate anonymous claims as long as details are given.
BOV is too important to the economy for any whiff of scandal – plausible or not – to be ignored.