On 24 November, the international credit rating agency Fitch downgraded its long-term Issuer Default Rating on Bank of Valletta plc to “BBB” from “BBB+” but maintained its outlook as “Stable”.
Fitch explained that it lowered its rating on BOV as it believes that its capitalisation is under pressure from increasing regulatory requirements and that BOV’s current capital ratios are not fully reflecting its operational and market risks. Fitch further added that “although the bank is considering strengthening its capital through a new share offer, this would not be sufficient to meet all future requirements”.
Fitch also stated that “although the bank has put in place a series of measures to reduce risks, we believe its risk controls continue to lack the depth required for the risks it faces in its operating environment.”
Whilst acknowledging BOV’s strengths, Fitch highlighted the Bank’s concentration risks and indicated that its “risk controls in the non-credit division have not evolved in line with the growth of certain businesses”.
Commenting on the downgrade, BOV CEO Mr Mario Mallia reaffirmed the Bank’s commitment towards strengthening its levels of capital as well as its risk management framework. Mr Mallia also added that BOV is “withdrawing from traditional businesses which lie outside our current risk appetite. We are also addressing legacy issues that involved the bank in undue legal and reputation risk. These are the measures we are taking today to ensure the future of BOV as a strong, stable and well-capitalised institution.“