Since its creation almost 50 years ago, Bank of Valletta has been instrumental in helping the Maltese economy develop during the post-independence era. Until recently, its nearly 20,000 shareholders saw the value of their shares increase while adequate dividends were paid regularly.

Still, like many other organisations within the financial sphere, BOV has had to grapple with considerable new challenges over the last decade, especially after the global financial crisis of 2008. When Malta joined the EU in 2004, the bank adopted some dubious strategies that then necessitated rethinking its business model.

The introduction of an aggressive sales culture saw the bank’s profits soar more than a decade ago but eventually led to accusations of mis-selling and consequent regulatory sanctions. The strategy to branch out into fiduciary services in Europe also led to legal action being taken against the bank abroad.

Like other local banks, BOV weathered the impact of the 2008 global financial crisis relatively well. But the introduction of the European Central Bank’s single supervisory regime for significantly important banks meant that BOV had to go through a change process to upgrade its management practices to higher European standards. 

In 2019, the bank recruited Rick Hunkin, an experienced UK banker with substantial expertise in risk management, as CEO. Hunkin’s change management strategy was characterised by the massive recruitment of consultants and executives to speed up the change process.

This meant that some experienced local executives had to take early retirement to be replaced by foreign employees. Shareholders who have not received a dividend in the last few years understandably expressed their frustration at the seemingly unlimited consultancy expenditure budget. At the same time, they were deprived of any income on their investment.

The bank’s chairman, Gordon Cordina, argues that, while the bank is satisfied with the progress under Hunkin’s tenure, this does not necessarily mean he is the right person to take the bank forward in the years to come. Hunkin will now be replaced by a new CEO later this year.

The skill set needed to manage change in a large organisation, especially where the government is the biggest shareholder, is an extensive one. The person leading this change needs to have sound banking experience and also possess the right degree of empathy and diplomacy to manage the dynamics of different stakeholders. The prospective change promoter must also pass the test of independence of thought that the regulators expect.

The bank would do well to ensure that the recruitment process for the next CEO is conducted with more care to ensure the bank does not suffer from more tortuous experiences like this in its restructuring process.

As in every organisation, a small minority of the bank’s employees will resist change by trying to use whatever connections they have to stop progress.

A good change leader needs to understand the local culture and subculture that exist in every large organisation. The collective interest of all shareholders should be the guiding motivation for the new CEO. 

BOV has all the elements to continue being a reliable supporter of the Maltese economy for many more years to come. While its business model may need to be refined, ultimately its mission will always be to support local businesses by mobilising the savings of hundreds of thousands of the bank’s loyal customers.

The great majority of the employees will, undoubtedly, look forward to being led by an executive team that appreciates their professional competence.