Bank of Valletta has told financial services companies it is stopping its custodian services for any Malta-based funds that hold assets valuing to around €4 billion, in a move that is expected to raise uncertainty in the industry.
Malta Today reported that the Maltese bank has sent out pre-notification letters informing financial services companies of the plans.
A custodian service is when an entity holds a client’s property or money on their behalf. BOV safeguards that investment funds placed within bonds or blue-chip stocks remain liquid. This means BOV is also able to monitor such investment funds.
BOV has undergone a turbulent few years with the La Valette funds case, the Falcon Funds pension case, getting €363 million worth of assets frozen (Deiulemar case), and the loss of its last US dollar correspondent bank all having a significant effect.
To cover the many legal battles the bank may face, BOV has set aside €75 million while its shareholders will fail to receive a dividend for 2018. The bank has denied having any responsibility in the Falcon Funds and Deiulemar cases.
The bank began employing custodian services once Deutsche Bank closed its doors in Malta, with the only alternatives offering the service being Sparkasse Bank or Swissquote. The government’s search for a new custodian service provider in Malta will be essential moving forward.
The move should not come as a massive surprise, with BOV already announcing last year that it had undergone a strategic review and would cut down for unprofitable non-core business.
BOV has maintained that its balance sheet has remained stable, with the bank’s profit standing at €88 million before the €75 million litigation charge. As it stands, the bank has deposits standing at €10 billion, has issued loans worth up to €4.5 billion, and has shareholder funds valuing close to €1 billion.