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€363m to be frozen after BOV loses appeal in Italian case

Funds being held by Italian intermediary in the form of securities

Updated 6.20pm

Bank of Valletta has lost its appeal against a €363 million precautionary warrant upheld by an Italian court a few months ago.

BOV sources said the amount had already been placed in the hands of an independent intermediary, but remained BOV's assets.  Now that the appeal has been lost, no further action would be required from BOV's side, he said.

The claim was filed by liquidators of the Deiulemar group and representatives of 13,000 Italian bondholders who lost all their life savings in a fraud scheme dating back to 2009.

The €363 million is linked to a trust opened by the owners of the collapsed shipping giant Deiulemar. The company went bankrupt in 2012 with losses of more than €800 million on its books. Seven people were jailed as a result of the collapse.

Liquidators for the Deiulemar group believe that BOV allowed owners to set up three trusts in 2009 - Capital, Giano and Gilda - which they illegally funneled millions into.

Last March, a court at Torre Annunziata ordered the disputed €363 million to be held through a precautionary warrant.

Read: BOV reacts as Italian court orders seizure of €363m

BOV announced that the appeal had been lost in a company announcement, which also said that the board of directors remained convinced of the "strength of its defences on the merits" but that it would keep the litigation under "constant review".

€363 million held by Italian bank

The €363 million is being held by an Italian bank acting as an independent intermediary, BOV said on Friday. 

Replying to questions, the bank told the Times of Malta that the money set aside is in the form of securities which formed part of BOV’s working capital. It was available immediately and placed with the independent entity in one go.

Asked what impact this would have on the bank, BOV said the funds, in the form of securities, would now have to remain in custody until the case was over.

The bank dismissed any potential concerns of a run on the bank – a situation where a large number of depositors clear their accounts for fear of the institution closing down.

BOV said that even in the worst case scenario, depositors would not be affected by the court case, “so there is no concern from that perspective”.

'We are overly liquid'

The bank noted that it was extremely liquid, with around 62 per cent of its assets held in securities and balances with banks.

“Our problem today is that we are overly liquid. The effect of the sequestro on the Bank's liquidity ratio is negligible,” a bank spokesperson said.

The €363 million in securities are still accruing interest, which will be collected by the Italian bank and forwarded to BOV.

The bank also said that the freezing order itself had no impact on shareholders.

“Nonetheless, and even though the bank continues to believe that the claim is baseless, the board will re-assess the situation in the light of this event and the environment that made it possible, and take any action that it may deem necessary, including making prudential provisions,” BOV said.

At this point, it was difficult to estimate how long the case could take, not least because of appeals and other remedies the bank may be seeking, BOV added.

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