Updated 12.15pm, adds PN statement
Bank of Valletta's only remaining correspondent bank to offer US dollar transactions wants to end the relationship.
Austria's Raiffeisen Bank International has advised BOV that it is "seeking to terminate" clearing US dollars for the Maltese bank from March 31 next year.
The move was announced by BOV in a statement on Friday.
Raiffeisen Bank is the only international bank that offers US dollar transactions for Bank of Valletta and is just the latest to pull the plug on the relationship.
Last year, Dutch bank ING cut ties with BOV, as part of a move to end relationships with smaller jurisdictions considered too risky to be worth serving.
At the time, ING was BOV's only bank to provide US dollar services, after Deutsche Bank had previously pulled out.
BOV then reopened US dollar accounts with Raiffeisen Bank in Austria, last summer.
In a statement, confirming Raiffeisen Bank wanted to terminate the US dollar relationship, BOV said it was in discussions "supporting US$ payments with a view to satisfying any concerns and restoring the position".
It said it was also "actively considering alternative routes" to diversify the available channels for the payment of US$.
A correspondent bank is typically used in international buy, sell or money transfer transactions to facilitate foreign currency exchange and payments.
A senior BOV source told Times of Malta the bank has an 'arrangement' with Western Union to process certain US dollar payments. The source declined to provide more details.
Banks form relationships with other banks to ensure they can move capital quickly and easily between jurisdictions.
A 2017 World Bank study found that these correspondent banking relationships have been gradually declining worldwide, as banks become less keen to take on risk and seek ways to cut compliance costs.
In January, BOV CEO Rick Hunkin said Malta is increasingly being viewed as a high-risk jurisdiction, making it harder for the bank to forge relationships with correspondent banks.
Political interference weakened bank's reputation - PN
In a statement, the Nationalist Party said this was a slap in the face for the country's financial services sector and will make it more difficult for foreign investors to choose Malta as their business jurisdiction.
Spokesman Mario de Marco pointed out that a number of decisions in which there was political interference had weakened the bank's reputation and it was as a result downgraded by Standard and Poor.
This was leaving an impact with many financial companies having problems to operate from Malta. This could be seen from the number of financial institutions, investment companies and SICAVs renouncing their licences in Malta in the past months.
This was also having a negative impact on many small shareholders, particularly the elderly, who trusted BOV with their money, as the value of their shares in the bank continues to go down.