Like any other shareholder, the government is expecting a "judicious risk policy which avoids such occurrences in the future" from Bank of Valletta in the wake of Friday's Deiulemar appeal ruling, Finance Minister Edward Scicluna told The Malta Independent on Sunday.
On Friday, a precautionary warrant of €363 million was issued against Bank of Valletta after it lost an appeal in an Italian court. The ruling means that the bank now has to leave the amount deposited in its name in Italy until a ruling is ultimately given by the Italian courts.
The case began after liquidators of the Deiulemar shipping company, together with representatives of 13,000 Italian bondholders, filed the court application against BOV after they lost their life-savings in the scheme dating back to 2014.
Scicluna also insists that the implications of the ruling should not be felt across the wider banking sector: "The outcome of this case is still unknown and be that as it may, the case will have no effect on the other banks as BOV is highly liquid, profitable and with a strong capital base," he commented.
"So there are absolutely no contagion implications on the banking sector."
As far as the effect on Malta's reputation as a financial services hub is concerned, Scicluna says that BOV's actions, so far, have been "transparent all along, informing the public at large of developments as they unfold, while at the same time taking all the precautionary measures including the setting aside of the full amount under dispute. Only through this correct policy does a bank protect its reputation."
On Friday, BOV CEO Mario Mallia said that while Deiulemar had passed the bank's due diligence back in 2009, it might not have passed today's new and improved rules.
When asked, both Mallia and bank chairman Taddeo Scerri said that all the due diligence boxes had been ticked back in 2009, but stressed that due diligence today is much more stringent than it was back then, and cast doubt over whether the bank would have gone for that investment today.
Scerri also stressed that the bank exited trust business altogether last year, explaining that it is not a profitable enough business for banks to be in, and that this case had not influenced the decision: "This is the epitome of problems that a business which doesn't give enough return could bring."
The €363 million was allegedly held in trusts at BOV by owners of the now defunct shipping giant, Deiulemar, which registered losses of more than €800 million. The company went bankrupt in 2012.
In the wake of the collapse, seven people were imprisoned with the highest prison sentence being a 17-year term. The shipping line's owners had allegedly been engaged in asset-stripping since at least 2005, through the setting up of numerous companies which were often based overseas.
Profitable assets were sold off, with the proceeds going to the owners themselves rather than to settle the company's mounting debts. Such practices had ultimately led to the harsh sentences against those involved, but investors are still facing an uphill struggle as they struggle to recover their funds. Liquidators alleged that BOV allowed Deiulemar owners to set up three trusts, a vehicle into which they illicitly funnelled money. BOV became a trustee for all three: Capital Trust, Trust Gaino and Trust Gilda.
Deiulemar's insolvency administrators, together with representatives of 13,000 Italian bondholders from Torre del Greco, had filed the court application against BOV after the bondholders found they had lost their life savings after the shipping line's owners illicitly transferred assets to trusts in Malta, Switzerland, Madeira and the British Virgin Islands.