Controversial decisions made by Bank of Valletta will be discussed at a meeting of small shareholders in the coming days, Times of Malta is informed.

Former Labour minister Alfred Portelli, president of the Malta Association of Small Shareholders, yesterday confirmed that BOV would be one of the most important items on the agenda in the upcoming meeting.

He said shareholders would try to seek more information on the many media reports concerning the bank, including loan financing to Electrogas that required the government to act as guarantor for €88 million.

“We will discuss BOV and what is being said in order to protect the interests of the small shareholders. I don’t know whether we will decide to take the issue further but we will surely discuss it and take it from there,” Mr Portelli said when contacted.

Last month, The Sunday Times of Malta reported that the government had issued an unprecedented €88 million State guarantee so that BOV could extend a €101 million loan to Electrogas Malta Ltd, the private company entrusted with building the new power station.

The Energy Ministry had said this was a temporary measure until the European Commission gave its green light to a security of supply agreement between the government and the company.

Then came the news that Planning Parliamentary Secretary Michael Falzon, a bank employee, was given a €260,000 early retirement golden handshake that included a special clause retaining the right to return to the bank once his political job ends.

BOV admitted that the early retirement was designed specifically to Dr Falzon’s requirements. The Malta Union of Bank Employees criticised the move.

Earlier this week, Tourism Minister Edward Zammit Lewis invoked banking secrecy when asked in Parliament about a news report that Air Malta was given unsecured loans by BOV to cover a shortfall in fuel hedging.

Apart from the government and Italy’s UniCredit, BOV has about 20,000 shareholders, mostly holding a few thousand shares each.

In an exchange of correspondence between Alternattiva Demokratika chairman Arnold Cassola – a BOV shareholder – and the bank, chairman John Cassar White, which was seen by this newspaper, it was assured that all necessary precautions were being taken when granting loans.

In an e-mail to the bank, Prof. Cassola complained of taking “a double risk” as a shareholder following the revelation of the €88 million State guarantee to Electrogas.

“Not only is BOV (the shareholders) giving out a €101 million loan but it is then the same shareholders who, as taxpayers, are guaranteeing €88 million of this loan,” Prof. Cassola wrote in his capacity as a shareholder.

Bank ‘very cautious on its business’

He noted that no maritime impact assessment had been made for the gas power station project, which included a floating liquefied natural gas storage facility. “It seems this factor has not been taken into account by BOV,” he pointed out.

Without entering into the merits of the particular loan to Electrogas, Mr Cassar White assured Prof. Cassola the bank was very cautious on its business.

“As a shareholder, let me reassure you that all the facilities that we grant are subject to the scrutiny of both our internal auditors and the external regulators who today include the European Central Bank,” Mr Cassar White said.

Major projects like building or extending a power station were very complex and financing was usually made by a consortium of banks because no single bank could cater for such lending on its own, he added.

“BOV is no exception and when it is asked to finance major infrastructure projects it seeks the expertise and involvement of other international banks that enter into this kind of projects on a regular basis,” Mr Cassar White said.

He told Prof. Cassola that taking collateral was “an added insurance” the bank insisted on to make sure debtors paid up as agreed.

In a Talking Point appearing today (see back page), Joe Pace Ross, a former senior banking executive, called on BOV to shed more light on the State guarantee.

Describing the €88 million guarantee as “tantamount to another form of bailout”, Mr Pace Ross says that although there could be simple answers to the questions being raised, the government and the bank chose to hide behind the confidentiality veil.

BOV shareholding:
Malta government – 25.23%
UniCredit SpA – 14.55%
19,229 shareholders – 60.22%