Bank of Valletta will be losing the services of its last remaining US dollar correspondent bank because it was doing well and not because it was doing poorly, Prime Minister Joseph Muscat said on Monday.

Fielding questions from reporters, Dr Muscat weighed in on news that BOV's last correspondent bank for US dollar transactions, Dutch bank ING, would be pulling the plug on the relationship come December.

ING will stop clearing US dollar transactions for BOV as of December 14, the Maltese bank said in a brief statement to the market on Monday morning.

Dr Muscat was reluctant to get into specifics, but said he was informed that BOV was working on plan for "fall back positions".

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Without referring to ING specifically, Dr Muscat said large banks were de-risking their business relationships with other institutions due to their own internal situations, and not due to Bank of Valletta's specific circumstances.

Rumours that ING was on the verge of ending its relationship with BOV began circling months ago, with the Dutch bank reportedly keen to cut ties with smaller jurisdictions it considers to be “too risky”, after paying a €775 million settlement for money laundering violations.

Joseph Muscat fields questions about BOV's correspondent bank loss. Video: Chris Sant Fournier

BOV 'totally different' - Muscat

A lot of the major changes occurring in the European banking sphere, Dr Muscat said, were due to banks failing, being tied down by non-performing loans or "falling apart".

"The situation with BOV is totally different. It is growing and strengthening so much… this is not happening because the bank is doing poorly, but because the bank is doing very well," he said.

BOV had grown exponentially – partly due to HSBC scaling back operations in Malta following legal troubles in the US - and was often viewed as being too big relative to the size for the Maltese economy.

“So this is a new skill that we need to hone, to do that type of de-risking. I know that BOV is looking strategically in this direction, and I am certain that decisions will be taken in coming weeks,” he said.

In comments to Times of Malta, BOV chairman Deo Scerri said that the bank was working behind the scenes to reduce its risk profile and had hired "two global consultancy firms" to guide the process. 

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