Bank of Valletta is determined to finalise negotiations with inexperienced investors who feel they were mis-sold perpetual securities in a bid to close an unfortunate chapter in the bank’s recent history that also saw it embroiled in legal issues over some failed products, newly appointed chairman Frederick Mifsud Bonnici has told The Sunday Times.
I have no sympathy for anyone who tries to pull a fast one on the bank
Individual investors are reportedly considering suing the bank over the way they were sold complex products they maintain were incompatible with their risk profiles. This potential legal issue is the latest in a string the bank has faced in recent months, the most high profile of which involving the poorly performing La Valette Multi-Manager Property Fund.
“We have started to communicate more intensively with shareholders and interested parties who may have differences with the bank,” Mr Mifsud Bonnici said. “These discussions are over and above the legal discussions. It is fair that people who feel they have a legal case pursue it. We have our views on the bank’s position at law.
“However, it is in the bank’s interest to try to close these cases as soon as possible by agreement. It is not always possible because lawyers’ views sometimes differ on particular legal issues, but generally we are looking for closure of the property fund episode and we are also determined to finalise negotiated agreements on issues involving perpetual securities.
“I don’t think it is in the interest of the bank that such matters are prolonged too much. This is something I have discussed with the board and with the executive team and they are in full agreement with me. We agree to move in that direction. Obviously, we have responsibilities to a number of stakeholders and we have to keep that in mind in the equation.”
Mr Mifsud Bonnici, who came out of retirement in late July to accept the BoV chairmanship following the sudden departure of Roderick Chalmers for family reasons, says he is determined to lead by communication, knowledge-sharing and example, guided by long-held values. A former chairman of the Malta Stock Exchange, he enjoyed a 42-year audit career at Pricewaterhouse Coopers until his recent, albeit short-lived, retirement. BoV’s “well-structured” governance has made it easier for him to get on board, he pointed out.
In a recent message to staff over the bank’s intranet, he emphasised the importance of adopting a ‘can-do’ attitude with clients, explaining how competitive advantage can be won by gathering better customer knowledge.
It was imperative that the bank acted with honesty, integrity, truthfulness and transparency for it to enjoy success. Mr Mifsud Bonnici now plans to visit teams in all branches across the network to share his vision and cascade his message across ranks.
The international banking industry has heightened its assessment of reputation risk and Mr Mifsud Bonnici is keen for the bank to follow suit. Bank of Valletta will adopt an even longer-term view in its planning, even if it means turning away customers who may prove potentially harmful.
“Knowing your customer is the basis of any fiduciary relationship and it is mutually beneficial,” the chairman said. “I will endeavour to ensure we have an even more hard-working, knowledegable, dedicated and ethical workforce. I will lead a supportive bank but our customers must be honest and transparent – not run along and spend the bank’s money on yachts and luxury cars and then ask for help when they struggle to pay their workforces’ salaries. I have no sympathy for anyone who tries to pull a fast one on the bank.”
Under a change programme initiated by Mr Chalmers, Bank of Valletta is to open up to six investment centres designed so that advisors are better trained and equipped to meet client requirements. All investment advisory teams will join a structure that will see them posted to branches, these investment centres, and the wealth management arm to meet the requirements of customers with varying risk profiles and requirements.
Running in tandem with these plans is a project to classify all investment products according to risk levels so that the appropriate investments are matched with customers. The sales process will be governed by the ‘four eyes’ supervisory approach.
Mr Mifsud Bonnici and the board are to continue the bank’s social responsibility strategy which directs proceeds from a seven-figure fund to support initiatives and causes that are inherently Maltese. Its community relations programme features seven pillars: arts and culture, heritage, environment, social, sport, education, and business strategic alliances.
Before his appointment at BoV, Mr Mifsud Bonnici was named a director on the board of Malita Investments plc, the investment holding company mandated to acquire, develop and manage strategic real estate of national importance. The special purposes vehicle is chaired by Kenneth Farrugia, a BoV chief officer.
“I am very sensitive to conflicts,” Mr Mifsud Bonnici replied when asked whether he would remain on Malita’s board. “I have no need to remain a director of Malita or Bank of Valletta, for that matter. With Malita we have a commitment to shareholders.
“We put together the prospectus for the initial public offering and it mentioned a list of directors which was approved by local and international bodies. I do not see any conflict, but if it is perceived that there is one, an internal discussion within governance structures will take place.”