Bank of Valletta has secured a correspondent bank relationship with Citibank, giving it direct access to US Dollar cash clearing services.

The agreement, announced by the bank in a statement this week, eases concerns about Malta’s largest retail bank being unable to clear US Dollars.

Those concerns reached their peak in 2019, when BOV lost its correspondent bank arrangements with Dutch bank ING and Austria's Raiffeisen Bank, two years after Deutsche Bank also backed out.

ING and Raiffeisen's withdrawals forced BOV to start clearing US Dollar transactions through Western Union.

Clearing is a banking procedure to reconcile buying and selling trades on financial markets. Financial services organisations such as banks rely on correspondent banks to serve as intermediaries in trades, allowing them to buy and sell to the intermediary rather than each individual party involved in transactions. 

Correspondent banking relationships have however dwindled over time, as tighter global anti-money laundering rules have made intermediaries more wary of assuming risk in trades. 

Speaking about its new deal with Citi, bank CEO Kenneth Farrugia said the development was a sign of the progress the bank is registering in strengthening its governance structures and compliance requirements.

“We are thrilled to announce our partnership with Citi, a financial services provider with vast expertise and a global presence. Our objective is to build on this relationship and explore other services as we continually seek ways to expand our capabilities to meet the evolving needs of our customers, who expect speed and accessibility above all else in cross-border financial services,” Farrugia said.

Emilios Kyriacou, Citi country officer for Greece, Cyprus and Malta said the partnership signalled Citi’s “commitment to supporting BOV’s strategy.”

Citi is one of the world’s leading banks and financial service providers, with banking relationships in 160 countries and jurisdictions.