Bank of Valletta’s share price yesterday dropped by 1.5 per cent on the back of a fine imposed by the financial services regulator as analysts warned of negative consequences if the bank did not wrap up the property fund saga.
Economist Karmenu Farrugia, who holds shares in BOV and the ill-fated La Valette Multi-Manager Property Fund, lambasted the bank’s directors for not admitting their mistake and insisted that with each passing day the bank risked losing customers, investors and goodwill.
BOV was found guilty by the Malta Financial Services Authority of breaching the investment restrictions listed in the prospectus of the La Valette Multi-Manager Property Fund when it invested in funds with a higher risk factor.
The bank disagreed with the conclusions and is set to appeal the decision.
“Nobody interprets the gearing ratio like the bank is doing. We are also accountants and can understand the technical jargon. BOV has absolutely no leg to stand on but the directors are too proud to admit a mistake,” Mr Farrugia said.
He lamented that, by commissioning experts to justify their stand, the bank directors were incurring a lot of expenses that would eventually backfire on shareholders. “Shareholders will have to bear the brunt of the expenses incurred by the bank and the mistakes it made,” Mr Farrugia said.
He described the bank’s settlement offer of 75c per share as “a joke”, arguing it did not even cover the original investment and called on BOV to settle the problem in a reasonable manner.
Turning to the regulatory authority he insisted the MFSA was obliged to publish the full report of its investigation.
The authority has said it was only bound by law to announce its decision, which it did on Wednesday after a nine-month investigation.
“It is not what the MFSA did or says that counts but what it has not divulged. The MFSA is obliged to publish the report. It should not have taken this long to conclude the investigation. It was too kind with the bank,” Mr Farrugia said.
According to business analyst John Cassar White, the BOV case has highlighted the need for better consumer protection in the financial services sector. “The MFSA has an important role as a regulator but I fear it may have a conflict of interest when it comes to investigate individual customer complaints against the same institutions it regulates,” he said, calling instead for the setting up of a financial services Ombudsman on the same lines as the UK.
Mr Cassar White said the BOV saga was damaging the image of the financial services sector and hoped the problem was resolved as quickly as possible.
According to Rizzo Farrugia Stockbrokers, over 14,000 BOV shares changed hands yesterday with further bids unsatisfied at the closing price.
The bank’s share price stood at €2.66 at market close.
ksansone@timesofmalta.com