The European Central Bank (ECB) has asked Bank of Valletta’s top officials to explain how millions of euros in unsecured loans were issued to Air Malta to make up for the airline’s discrepancy in its fuel-hedging agreements over the past year, this newsroom can reveal.
In a highly sensitive state of affairs currently being dealt with under a shroud of secrecy by Bank of Valletta’s top brass, the ECB’s bureaucrats on the Joint Supervisory Team with members from the Malta Financial Services Authority (MFSA) have sounded alarm bells on what they deem constitutes unorthodox transactions by the bank to help Air Malta.
The national airline, which has been battling insolvency for several years and is doing its utmost to restructure and secure approval from the European Commission for another ‘state-aid programme’, found itself in dire straits when a fuel-hedging agreement went haywire following the sharp fall in the international price of oil over in the past year.
This newsroom is informed that Air Malta had to turn to BOV to help it fund the discrepancy via ‘quick loans’ but, given its ailing financial situation, the airline could not provide the bank with collateral to fund the immediate loans needed to sort out the purchase of fuel. It did not turn to the government to guarantee the much-needed loans, since any such action would constitute an outright breach of EU state-aid regulations.
While the government is the sole (100 per cent) shareholder of Air Malta, it also has a 25 per cent shareholding in BOV, along with the right to appoint the bank’s chairman. Unable to secure the loans elsewhere, Air Malta managed to persuade BOV to issue regular loans to cover its fuel price discrepancies until the fuel-hedging agreement draws to an end next month.
When approached by this newsroom, Bank of Valletta was not ready to comment on the amount of the unsecured loans given to Air Malta and who authorised them.
In a short reply to our questions, Kenneth Micallef from the CEO’s office said that the bank was “not in a position to comment on issues concerning persons or entities which may be customers of the bank”.
Our questions, however, concerned BOV’s practices and not those of its customers. While a simple ‘yes’ or ‘no’ from the bank would have sufficed, insiders who spoke to this newsroom said “The issuing of unsecured loans to a state airline in difficulty is what irked the ECB members on the Joint Supervisory Team”.
Air Malta, meanwhile, was even less forthcoming in its replies to our questions. “Air Malta does not divulge any sensitive commercial information related to its dealings with banking institutions,” said Air Malta CEO Philip Micallef. He added: “All Air Malta accounts are audited and published on an annual basis and are in the public domain.” This begs the question: If accounts are in the public domain, why then has its CEO described the information requested as “sensitive commercial information”?
Bank chairman could be excluded from government-related deals
The ECB’s bureaucrats on its Joint Supervisory Team are now hinting at a possible scenario in which the government appointed chairman, John Cassar White, will be asked to refrain from attending and/or participating in the bank’s business decisions related to the government and all its companies and authorities.
Contacted by this newsroom, Rolf Benders, Senior Press Officer at the ECB’s headquarters, simply said: “As a matter of policy, we do not comment on individual banks.”
This would be the first time the ECB/MFSA Joint Supervisory Team will pressure Bank of Valletta over its long-standing statutory clause giving the government the liberty to appoint the bank’s chairman. Up until now it has had no reason to intervene as the bank has always excelled as a serious and reputable institution, with continuously positive ratings from international financial institutions.