Bank of Valletta, which on Friday announced it had taken a €15 million charge to bring closure on the painful Valletta Fund Management property fund case, complained that it is ‘not happy’ that the Malta Financial Services Authority (MFSA) investigations concerning this case have still not been completed.

The MFSA had launched three separate investigations but only one had been concluded and the MFSA had fined the bank €347,000 for regulatory breaches. The bank, while contesting the conclusion, had not appealed it.

MFSA is still examining a claim that the property fund had been sold to non-eligible investors as well as the far more damaging claim that there was some insider dealing, which was said enabled some people in the know to get out of the fund in time.

The bank refuses to accept that anything like this happened and bank chairman Roderick Chalmers (photo) said at a press conference on Friday that the bank is still urging MFSA to conclude its investigations. He said he is completely confident the inquiry will show there was no wrongdoing and he hopes, if that is the case, that those who made the allegations will retract them.

The case has had an adverse effect on the bank’s reputation, Mr Chalmers acknowledged, which was why the bank took steps to address the issue and put it behind it.

The bank has learnt its lesson, Mr Chalmers said, without specifying what were the lessons learnt. It has ordered a top to bottom review of the process followed and will implement changes. This, however, does not mean the bank was wrong, Mr Chalmers added.

The review will also look into the relationship between the bank and its service providers given that in this case it was not the bank that ran the fund.

However, the final year results showed that even more than the impact of the VFM fund charge, the bank’s profits were impacted by an overall Fair Value charge of €24.9 million due to the current euro crisis.

Because of these two adverse impacts, the bank’s profit decreased from the previous year’s €98 million to €64 million, a 35 per cent drop.

Meanwhile, an update of the July stress tests carried out by the European Banking Association has been published.

When the July stress tests were carried out, BOV had passed the tests with a very good Tier 1 Capital Ratio of 10.50. This time, further stress was worked into the calculation and BOV was estimated at 10.40 and passed the test. This means that, as against other banks that must be recapitalized by their nations or shareholders to the tune of €106 billion by next June, BOV is among the best banks in Europe.

The stress tests are being progressively made harder and it will be only in 2020 that the bank, if it is still at this level, will just fail the stress tests then. In preparation for that, “BOV has been preparing itself for the new regulatory regime,” Mr Chalmers stated, “and plans to achieve compliance by building up core capital through profit retention, and does not at this time foresee any need to raise new equity from shareholders or from the market.”

When the July stress tests were carried out, BOV was estimated to be on the same level as Dexia Bank. Since then, Dexia has collapsed and split up. This, BOV officials told this paper, was due to its liquidity problem not its core Tier 1 level. Mr Chalmers described the bank’s balance sheet as one that has been managed prudently and deliberately, resulting in a very satisfactory liquidity ratio of 44.4 per cent. Total capital ratio stood at 15 per cent, a level that already meets the more demanding ratios being required as a result of recent EBA and Basel III requirements, he said.