The BOV’s questionable loans to Steward Malta

According to the landmark court judgment in the Vitals/Steward case, decided in favour of Adrian Delia as the former leader of the opposition, Bank of Valletta loaned Steward Malta €5 million on May 8, 2018; €3 million on September 19, 2018; €22 million and €5.9 million both on July 17, 2019 – a total of €35.9 million.

The judgment also revealed that the government stood as surety (għamel tajjeb) for these loans although Steward was the owner of three public hospitals which, according to the court judgment, had been ceded fraudulently to the company by the government when led by Joseph Muscat.

The circumstances behind BOV’s approval of these loans warrant investigation. Did the bank adhere to normal bank lending principles or was there pressure from higher quarters because of ulterior interests bent on doing everything to prolong the existence of a corrupt deal? Among the evidence brought to light are certain facts indicating that all basic bank lending principles were thrown to the wind.

Among these, Steward had not produced audited accounts for years; it had a ridiculously low paid-up capital; there is no way that the company could have produced a cash flow statement proving that Steward had the capability of repaying the loans from reliable sources.

So those responsible for approving these loans should be made to explain the reason for such rash decisions for which taxpayers will probably have to bear the brunt in view of the government’s guarantee.

It is interesting to note that the loans were authorised while Taddeo Scerri (appointed in December 2016, for many years auditor of the Malta Labour Party and who ran away from BOV when he resigned in May 2020) was the bank’s chairperson at the time that over three-quarters of the loans’ total was approved in July 2019.

Also, it is to be noted that, some five months later, Alfred Mifsud was appointed a non-executive board member. Both he and I were well groomed on sound bank lending principles during our years with Barclays Bank Malta.

Had Mifsud been a board member earlier that year, I would like to think that he would have raised eyebrows and expressed strong views against such a substantial loan which was clearly made solely on the strength of the security offered, the full impact of which would ultimately have to be borne by all taxpayers as it was so clear even then that BOV would have to demand payment from the guarantor once Steward defaulted.

Moreover, over a five-year period, it is assumed that inspectors from the local banking regulator, the Malta Financial Services Authority, will have made one of their periodical inspections of BOV. This in addition to the fact that, being one of Malta’s six core banks, the bank falls under the surveillance of the European Central Bank.

Surely, such a suspicious and questionable substantial exposure to a company of dubious standing as Steward Malta should have been queried.

The then BOV chair along with all board members and CEO have a lot to answer for.

It does not seem coincidental that, according to revelations made in 2019, on instructions from the ECB, the MFSA had written to BOV expressing ‘serious concerns’ about serious shortcomings in that bank’s operations.

Anthony Curmi – St Julian’s