Trying to recall our lives back in February feels like a distant past and significantly longer than three months ago. The markets have changed, economies have changed, and working approaches have changed. Today it is clear that agility and fast decision-making in uncertainty is critical.
Retail banks are not usually associated with fast decision-making in uncertainty; however, seeing the lockdown unravel through March and the impact it was having on our clients’ future revenue streams it was clear to us at Bank of Valletta that we needed to act fast.
To address clients’ immediate needs, until the government guarantee measures materialise in the market, the bank issued a €10 million business assist fund. After one week, €12 million in working capital facilities were taken up, with the fund being topped up to €20 million on March 26.
The ability of the bank to launch this stop-gap solution entailed amending existing EU-funded financial instruments in the market by tweaking eligibility criteria in collaboration with colleagues at the European Investment Fund so that current instruments can focus exclusively on working capital measures, over longer terms with more flexible moratorium periods. This worked in the interim until the government’s guarantee scheme administered by the Malta Development Bank was approved by the European Commission on April 2.
The decision to move fast in uncertainty did have its challenges
In the span of 19 calendar days, Bank of Valletta structured the BOV MDB COVID Assist product based on the European Commission approval and launched it in the market on April 21. This entailed extensive engagements with the Malta Development Bank to align interests, change internal operating procedures, upgrade IT systems to be able to integrate the complexities of a blended guarantee and interest rate product. We managed to do all of the above and be first in the market to give the required signal and assistance to the business community.
The BOV MDB COVID Assist is open to both large enterprise and SMEs offering interest rates starting from a fixed rate of 2.5 per cent for the first two years and requesting minimal collateral, depending upon the size of the loan and associated risk, allowing the bank to respond promptly to client needs.
The decision to move fast in uncertainty did have its challenges. Some details of how the schemes would operate, together with certain eligibility criteria are being refined on the go. However, it was clear to the bank that we need to move fast in these exceptional circumstances to give the business community the oxygen their business needed at this point in time.
The swift launching of innovative guarantee and interest rate subsidy products in the market by Bank of Valletta will ensure that the Maltese economy will be in a position to bounce back stronger out of these challenging times.
Any views, assumptions or opinions expressed in this article are those of the author.
Albert Frendo, BOV chief credit officer