BOV is inching closer to finding a solution to its US dollar correspondent banking woes, with one source saying the bank was confident it had a solution for processing incoming dollar payments, but not outgoing ones.
A spokesman for the bank confirmed that discussions are still ongoing, but the bank was not in a position to give any updates when questioned by the Times of Malta.
BOV confirmed in June that its last provider of US dollar transactions was pulling out by the end of the year.
Correspondent banks help domestic banks access foreign financial markets and conduct transactions in other countries, particularly in dollars.
In a separate company announcement, the bank said its efforts to find an alternative US dollar clearing arrangement have progressed.
The bank has since embarked on an aggressive de-risking campaign in its efforts to secure a relationship with another institution offering US dollar transaction clearing services.
Correspondent banks across the globe have becomes increasingly more risk averse, and will often shy away from servicing banks in small jurisdictions with a concentration of high-risk clients.
BOV has approached a number of smaller banks in the US about a possible correspondent relationship.
The bank said in its company announcement that the progress towards securing such correspondent banking services had progressed, despite the challenges that smaller jurisdictions like Malta face, since they lack the critical mass to attract larger players.
“A number of options were evaluated and the work required to establish new alternative correspondent banking arrangements is progressing well. The Bank shall become a direct SEPA participant on 19th November 2019”, the bank said.
Deutsche Bank, which used to provide correspondent banking services to BOV up until 2017, this month confirmed it will be ditching all correspondent banking ties with Malta.
Deutsche Bank has come under intense regulatory scrutiny across the globe over its processing of dirty money, some of which came about as a result of its correspondent banking relationships.
A Deutsche Bank official told the European Parliament in February that the bank had sharply scaled back its role as a correspondent bank.
In parallel with these Deutsche Bank scandals, Malta has, over the past few years in particular, gained a reputation as a high-risk jurisdiction.
A spokesman for Deutsche Bank had told Times of Malta that Deutsche Bank reviews its correspondent banking relationships on a regular basis.
He said the bank factors into consideration, among other things, the cost aspects of a potential correspondent banking relationship and the bank’s overall country coverage strategy.