Policy rift sets in between Castille and BOV chairman

A rift on banking policy has reached new levels, as government sources say the Office of the Prime Minister wants Bank of Valletta – in which government holds the largest institutional shareholding – to change tack by relaxing its limits on credit.

MaltaToday understands that there is pressure mounting on Bank of Valletta chairman John Cassar White, to move out of his politically-appointed role or change direction as the bank insists on applying “archaic rules” when it comes to established business clients, potential investors and foreign clients.

Prime Minister Joseph Muscat has made his discomfort clear in couched terms on Friday: “I am disappointed with the level of engagement of banks in assisting start-ups. They shouldn’t be glorified safety deposit boxes but should participate in the economy. People will not judge banks on their profits but on their ability to stimulate the economy.”

A government source said the Prime Minister’s comments, announced during a lunch at the Auberge de Castille for a seed investment scheme that will grant €250,000 in tax credits for business angels investing in start-ups, were a clear dig at BOV policy.

But a spokesman for the Office of the Prime Minister told MaltaToday that references also applied to HSBC.

“At a time when the economy is booming there is an apparent and real feeling that the banks are not in synch with the demand of the investor. The balance between caution and supporting investment is lopsided,” an OPM spokesperson said.

Asked if the Prime Minister was angling at Cassar White’s resignation, the spokesperson said that the BOV chairman’s appointment was a matter that was up to the prime minister.

The seed investment scheme will allow tax credits of 35% of a business angel’s total investment, capped at €250,000, for who invests up to €750,000 in start-ups. The scheme will run until the end of 2018 or until total investments reach €5 million.

Cassar White, a former chairman of the Malta Shipyards under the Sant administration, has a long banking career with special emphasis on risk management. He was appointed in April 2013 and spent most of his 36-year professional career with Bank of Valletta.

But in government circles, he is criticised for adopting a conservative approach when it comes to restrictive credit lines for businesses seeking liquidity to finance their projects.

Cassar White is also one of the leader writers for the Times, a position whose interest he did not declare to the government. “As an experienced journalists and purely as an academic consideration you know that it is editors who assume responsibility for what is written in editorials that are published in their newspapers,” Cassar White had told MaltaToday when asked on the apparent conflict of interest.

Cassar White has also adopted a totally different position on BOV’s long-standing dispute with investors of Valletta Fund Management’s La Valette property fund, in which €50 million was lost in retail clients’ investments.

Finco partner Paul Bonello, who represents 2,300 clients, has accused Cassar White of reneging on a commitment to take the issue of full compensation for La Valette property fund investors to arbitration.

Bonello has stated that Cassar White does not want BOV to pay out more compensation over a conditional 75-cent per share offer that investors had accepted, which cost the bank €40 million.

The Labour government, which listed full compensation for the La Valette investors in its electoral programme, created the role of a financial services arbiter to negotiate a settlement with Bank of Valletta.