Outgoing BOV Chairman John Cassar White said today the bank needed a €150 to €200 million boost to its capital over the next three years.
Addressing BOV’s annual general meeting, Mr Cassar White said the banking world was changing with much stricter regulations.
Referring to last month’s downgrading of BOV’s long-term rating by credit agency Fitch, Mr Cassar said the downgrade was not linked to the bank’s performance over the past years.
He said foreign banks with the same credit rating had better capitalisation ratios than BOV, therefore the Fitch downgrade reflected that.
Another concern highlighted by Fitch was the concentration of BOV’s lending to the government and in the property sector.
Mr Cassar White said this lending to the government had been an ongoing process for the last 30 years.
Many of these loans were guaranteed by the government, Mr Casssar White said.
READ: John Cassar White to step aside as BOV chairman
He acknowledged that the bank needed to diversify its income streams.
The outgoing chairman, who is to be replaced by government nominee Taddeo Scerri, said the need to combat money laundering was now a prime concern for regulators.
The bank had to be sure of the provenance of every single bank account and deposit it accepted, Mr Cassar White said.
He said many of the issues were legacy ones on accounts opened before more stringent anti-money laundering rules came into place.
Mr Cassar White said there was no “magic wand”, as the process of scrutinising these accounts took time.
He said the bank was committed to ensuring that its accounts were not used for illegitimate purposes.
BOV had been boosting its risk compliance unit accordingly, Mr Cassar White said.
Mr Cassar White said BOV had stopped its trust business two years ago, as it was proving “problematic”.
Continuing on this, BOV CEO Mario Mallia said the trust business contained certain risks that were not justified by the returns.
He explained that BOV was identified as a systemically important bank by the ECB, therefore requiring more stringent capitalisation.
Mr Mallia said BOV was looking to shift its business model from one based on quantity to one based on quality.
He said the bank was willing to sacrifice short-term profits for long-term stability.
During the meeting, BOV shareholders approved the proposed final gross dividend of €0.0852 per share. The board’s recommendation of a bonus issue of 1 share for every 13 shares held was also approved and as a result, the Bank’s permanent capital will increase to €420 million.
New board of directors
Shareholders attending the AGM elected the following directors:
• Stephen Agius
• Alan Attard
• Paul V Azzopardi
• James Grech
• Alfred Lupi
• Joseph M Zrinzo
As previously announced, the government has appointed Taddeo Scerri to take over from Mr Cassar White as chairman and Anita Mangion as director. UniCredit S.p.A. has appointed Antonio Piras as director at the bank for a three-year period.