BOV plc has €8.7 million in net sovereign exposures in Greece
Bank of Valletta (BOV) plc has got net sovereign exposures of €8.7 million in Greece, the country which had to be rescued by a joint package by the EU and the IMF earlier this year after registering a budget deficit of more than 12% for 2009.
24 July 2010, 12:00am
Charlot Zahra
Charlot Zahra
4 min read
Until now, both BOV and the MFSA had kept silent on the Maltese bank’s exposures in Greece, however the results of the EU stress tests published yesterday also included a table of the bank’s sovereign exposures in EU Member States at the end of last year.
Other ‘risky’ exposures for BOV at the end of 2009 included €3.1 million in net exposures in Portugal, which has seen a downgrade of its credit rating after fears that the country would default on its public deficit, and €0.9 million in Iceland, whose banking system had melted last year after exposure of Icelandic banks in the UK.
BOV did not have any exposures in other two EU Member States of the so-called ‘Pigs’ club – Italy and Spain, who are known for their high deficit figures when compared to their GDP.
In Eastern Europe, BOV’s highest exposure at the end of 2009 was in Poland with €13.3 million, followed by Hungary with €3.2 million, and Lithuania with €3.0 million.
Other less risky exposures at the end of last year for BOV included €13.2 million in Germany, €10.2 million in France and Sweden respectively, and €4.8 million in Norway, which incidentally is not even an EU Member State.
As expected, BOV’s highest sovereign exposure is in Malta, with €884.8 million in net exposures at the end of 2009.
Yesterday afternoon, in a company announcement, BOV had announced that it had passed the EU stress test set out by the Committee of European Banking Supervisors (CEBS) after CEBS had released the results pertaining to a stress test carried out on 91 leading European banks, in collaboration with the European Central Bank (ECB) and local authorities, in Malta’s case the CBM and the MFSA.
The results showed that BOV Group enjoyed “strong capital buffers”. When the bank’s consolidated balance sheet and income statement were stressed in accordance with the parameters set by CEBS and the ECB, its Tier 1 ratio, which was an international indicator of balance sheet strength, decreased by 1.2%, reaching 9.3%. This, the Bank had said, was “one and a half times higher than the 6% pass mark” set for this exercise and more than double the statutory minimum ratio of 4%.
BOV Chairman Roderick Chalmers had said that these results “confirm that BOV is a well capitalized bank by all international standards, and that the capital buffers we hold are more than enough to see us through situations of stress.
“The strength of the Group’s regulatory capital position is the direct result of the quality of our assets, and our prudent dividend policy, whereby over the years we have sought to balance capital conservation with an attractive dividend return for our shareholders,” he had said.
Roderick Chalmers added that the bank carried out internal stress tests “on a regular basis” as part of its risk management process, and that capital buffers were monitored continuously by the board and by executive management.
“Capital is the motor which drives the bank’s business, and the prudent and efficient management of capital is one of our top priorities,” Chalmers concluded.
As revealed by MaltaToday, HSBC Bank Holdings plc, the parent company of HSBC Bank (Malta) plc, the other major bank in Malta, had also passed the EU stress tests.
At 31 December 2009, it had a capitalisation ratio of 10.8%, well above the 6% capitalisation rate required under the EU stress tests.
Under the benchmark scenario at the end of 2011, HSBC Holdings plc’s capitalisation ratio rose slightly to 11.7%, still above the 6% capitalisation ratio required by the EU stress tests.
Under the adverse scenario, which assumed a 3% deviation of
Under the additional sovereign risk shock, which represented a deterioration of market conditions of a similar magnitude as observed at the peak of the Greek crisis in early May 2010, HSBC’s capitalisation ratio decreased slightly more to 10.2%, however it still remained above the 6% threshold.
Lombard Bank Malta plc and APS Bank plc were not chosen by the CEBS for this round of stress tests.
Banif Bank, the recent addition to the retail banking sector in Malta, was not among the four Portuguese banks that were examined by the CEBS in conjunction with the Central Bank of Portugal.
The exercise included a sample of 91 European banks, representing 65% of the European market in terms of total assets.
As a result of the exercise, under the adverse scenario 7 banks would see their Tier 1 capital ratios fall below 6%, with an overall shortfall of €3.5 billion of Tier 1 own funds.
The CEBS explained how the threshold of 6% was used as a benchmark solely for the purpose of this stress test exercise. “This threshold should by no means be interpreted as a regulatory minimum (according to the CRD the regulatory minimum for the Tier 1 capital ratio was set to 4%),” the CEBS had warned.
