Bank of Valletta’s long-term outlook has been affirmed as negative by credit rating agency Fitch, which in its report cited “risks” as a concern. 

On Wednesday, BOV announced that its long term credit rating by Fitch stood at BBB. 

BOV said Fitch would revise the bank’s outlook to ‘stable’ if it “makes visible progress in strengthening its risk controls without materially eroding profitability.”

The rating agency commented positively on BOV’s “adequate capitalisation and stable funding and liquidity”, on its “stable and ample customer deposit base” and on its “satisfactory asset quality”.

This was because of “risks from persisting operational risk headwinds and from the bank’s uncertain ability to strengthen its risk governance in a timely and effective manner.”

Credit ratings help investors decide how risky it is to invest money in a specific country or security.

A 'BBB' is considered to be a satisfactory credit quality. Anything with a rating worse than one step below that, BBB-, is considered to not be an investment-grade security.

BOV confident about its future

BOV CEO Mario Mallia expressed satisfaction at the confirmation of the Bank’s credit rating.

BOV’s two-year transformation programme, he said, would address the issues raised by Fitch.

“Our transformation programme, which is now in full swing, addresses risk governance, business de-risking and anti-money laundering issues.  There is no gain without pain, and we will inevitably experiences pressures on profitability for the duration of the programme,” he said.  

BOV's tough year

Earlier this month, Times of Malta reported how several gaming and other ‘high risk’ businesses were being cut loose by BOV, following instructions by the European Central Bank to “de-risk”. 

The de-risking exercise began in recent weeks, with the bank sending out letters to several corporate account holders informing them that they were no longer in a position to offer them banking services.

De-risking is the practice of financial institutions exiting relationships with, and closing the accounts of, clients perceived to be “high risk”.

Rather than manage these risky clients, financial institutions opt to end the relationship altogether, consequently minimizing their own risk exposure.

Back in July, BOV had been downgraded by another ratings agency, Standard and Poor’s.

The rating, previously at BBB with a negative outlook, was stepped down to BBB- with a stable outlook. The bank's short-term rating was also revised form A-2 to A-3.

The agency cited perceived weaknesses in the bank’s internal control framework and potential impact form its ongoing litigation cases in its decision to downgrade the rating.

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