Businesses that hold accounts with Bank of Valletta will need to start paying three times as much in administration fees from next February.

The bank sent out a letter to its business clients this week, informing them that the administration fee - previously known as the account maintenance fee - will go up from €10 to €30 monthly due to added costs related to regulatory checks and balances.

BOV levies the fee on all "non-personal customers", except for voluntary organisations, meaning a small business must now pay €360 a year to maintain its BOV account.

The bank's decision to increase fees mirrors a similar move made by its largest high-street rival, HSBC, which increased its monthly fees for business clients back in 2019. 

Chamber of SMEs: rise is unjustified

The staggering surge angered the Malta Chamber of SMEs, which had already disputed the €10 fee a few years back, arguing it was unjustified.

It said the bank is abusing its dominant position in the local market to make more money.

Changing banks is extremely complicated for businesses, the Chamber noted, so most of them will simply have to incur the added costs.

"This is a case of complete abuse of dominance and the regulators that should safeguard fair competition and the interest of smaller players are not doing anything about it," Chamber of SMEs CEO Abigail Mamo told Times of Malta on Friday.

"It's daylight robbery."

BOV is Malta's largest bank and provides services to 365,000 clients. Of those, 20,000 are business clients. 

The bank has had a bruising 2022 in financial terms, having had to fork out more than €100 million to settle a long-standing dispute with Deiulemar shareholders that landed it in the Italian courts.

However, it registered a €22 million profit in the first three months of 2022, before that settlement deal was reached.

Bank blames due diligence costs

In the letter it sent clients this week, BOV explained the reason behind the fee change.

"The revision in the fee reflects the added costs and resources deployed to ensure the carrying out of due diligence and monitoring to the required standards in line with regulatory demands and supervisory expectations," it said.

HSBC had provided a similar justification when it increased its fees in 2019.

In a reply to questions by Times of Malta, a spokesperson for BOV said the new fee is aimed to recover the Bank’s costs associated with the Anti-Financial Crime (AFC) policies and procedures.

"AFC practices are a critical element of the Bank’s Compliance and Regulatory framework and this has been substantially enhanced in the last years to keep it in line with evolving regulatory demands and supervisory expectations," a BOV spokesperson said.

"This essentially meant that substantial investment is being undertaken both from a human resources and technological perspective."

The fee carried a "no objection" from the Malta Financial Services Authority following lengthy discussions, the bank said, adding it was "moderate" compared to that charged by other banks locally and internationally.

But the Chamber of SMEs is questioning the bank's due diligence systems.

"We understand that regulatory requirements have increased and costs related to due diligence and checks and balances have indeed risen, but the bank also employs archaic systems and inefficient methods, the cost of which is then shoved on small businesses," Mamo said.

"Let's take a small business that has been a client with BOV for many years, has a very basic operation and does not do overseas business. Why does it have to incur the same charges and fill out the same forms as larger businesses, when it is clearly not as much of a risk?"

BOV insists that anti-financial crime regulations are applicable to all types of customers.

"The fee has been applied to non-personal customers where the level of know-your-customer and due diligence reviews and ongoing assessment requirements are the most demanding," the spokesperson said.

"It is important to point out that personal customers and sole traders have been excluded from the application of this fee."

BOV business clients received an email informing them of the change this week.

Fees spiralling

Mamo said BOV already makes money off businesses through many of its services, but additional fees have nonetheless spiralled even more over the past year.

Businesses have to pay extra for depositing coins and for depositing cash in the night safe, she said, and they are being charged "absurd" fees whenever they deposit more than 100 cheques.

Costs have also increased for businesses depositing more than €10,000 in cash daily.

"We understand that the bank is trying to decrease risks associated with cash transportation, but some businesses, such as fuel stations and supermarkets will inevitably have a lot of cash to deposit because that is where people pay cash the most," she said.

But the bank has engaged in efforts to reduce cash and cheque transactions and move clients towards digital banking.

"The transaction fees that were introduced in the past were earmarked to shift customers’ legacy payment preferences using cash and cheques to digital payments," the spokesperson said.

"In fact, we have seen a significant reduction in cheques issued by customers and processed by the Bank. It is pertinent to point out that the Bank has markedly reduced its batch payments fees to encourage customers to shift to digital payments."

In an interview with Times of Malta earlier this month, BOV chairman Gordon Cordina and CEO Kenneth Farrugia defended their efforts to move clients to a digital banking system and reduce as many cash transactions and cheque deposits as possible.

They said Malta was a record-breaking cheque issuer before the pandemic, with some businesses issuing 20,000 or 30,000 cheques annually.

BOV alone would process more than 350,000 cheques per month, they said. The process was wasting paper and time and added no value to the bank's work, they argued.

Following the new fees on cheque deposits, the number of monthly cheques dwindled down to 114,000, they said.

They said they are determined to move further ahead into the digital age because the younger generations are far more reluctant to go to the bank nowadays. But they vowed to keep enough branches and ATMs open until there are people in the population who need them.