BOV chairman on stricter banking rules: ‘We’ll be less profitable, but safer’

A Bank of Valletta director who challenged a suitability-assessment exercise that found him “unfit for re-election” has been automatically elected to the board of BOV, after two candidates dropped out of the race.

George Portanier was elected to the board of directors of BOV, which is partially owned by the Maltese government and the general public, together with Helga Ellul, James Grech, Mario Grima, Alfred Lupi, and Joseph Zrinzo. Chairman John Cassar White and Taddeo Scerri were appointed to the board by the Maltese government, while Gabriele Simonetti was appointed by shareholder Unicredit.

In his address to the AGM, Cassar White said that the banking supervisory landscape had changed and become very intensive.

“The bank is experiencing a new supervisory landscape that is characterised by consistent risk-based supervision and the adaptation of the EU Single Rule Book. The European Parliament and the European Commission had introduced the new Single Rule Book so as to monitor all EU banks in the same way and eventually achieve harmonisation. This has presented a challenge but one must expect things to move on. Light supervision is a thing of the past. Monitoring now is very intensive,” Cassar White said.

The Joint Supervisory Team conducted its reviews during the year 2015 and followed technical standards as set by the European Central Bank. The chairman explained that the Board of Directors' loyalty towards the interest of the depositors comes before the interests of the shareholders.

Cassar White said he cannot promise that the same profit achieved during this year would be guaranteed for the future. “Banks in the near future will be less profitable, but safer.”

Board election

Candidates Alicia Agius Gatt and Joseph Borg withdrew their candidature. The former was also declared by the board to be “unfit for re-election”, but defied the decision to put forward her candidature.

Portanier, who has served on the board for 22 years, had challenged BOV’s decision in court.

Directors of banking institutions have to undergo a suitability test every year in new rules laid down by the European Central Bank.

Chairman John Cassar White was reported by The Times to have instructed the directors to make a self-assessment. After being declared “unfit”, Portanier took the matter to court, which dubbed the bank’s internal exercise “an antithesis of EU banking regulation”, because the bank failed to set up an independent nominations committee, as required by EU rules.

Bank results

CEO Charles Borg expressed satisfaction at the pre-tax profits of €117.9 million which represented an increase of 13% over the results of the previous year.

Core operating profit of €91.3 million represented an increase of 4% over the previous year. The key performance indicators were also satisfactory with a Return on Equity (ROE) of 18.4% and a Cost-Income ratio of 41.8%.

Over €600 million were drawn down in business related facilities across a broad spectrum of economic sectors during FY 2015, whilst concurrently the Bank ensured rigorous risk assessment procedures were in place at both micro and macro levels.

Borg underlined the importance of the overall customer experience that has always been a strategic objective of the Bank. In order to ensure the Bank’s long-term sustainability and relevance for its clients, the Bank set up a new Change Management function that is responsible for managing the Bank’s overall change management portfolio, including regulatory projects, systems and business processes to ensure that they are aligned with the Bank’s overall vision and complement its strategic objectives.

Four resolutions were put to the meeting. These resolutions included approval of the Profit and Loss Account and Balance Sheet for the year ended 30 September 2015, and the Directors’ and Auditors’ Reports. In addition, a gross final dividend of €0.085 per share, which represents a gross payment of €30,600,000 as recommended by the Directors, was approved for payment on the 18 December 2015.

Approval was also obtained to increase the issued share capital of the Bank to €390 million following capitalisation of €30 million from retained earnings for the purpose of a bonus issue of 1 share for every 12 shares held on the 15 January 2016.