Roderick Psaila | Straightforward and robust

What is AgriBank? What sort of services will it be offering and what sort of customer base is it targeting?

AgriBank PLC may be described as a commercial bank, granted a banking licence from the Malta Financial Services Authority (MFSA) in October 2012, following a licensing process in which we not only convinced the MFSA of the AgriBank model, but also presented a Board of Directors and management team who were deemed capable of running the bank.

The bank's model is straightforward and robust at the same time. AgriBank will attract funds from savers in the retail sector, the farming industry and the general public, and provide asset financing in the form of Hire Purchase agreements and Financial Leases to the Agricultural sector, mostly British farmers.

The bank's model is straightforward because the bank's balance sheet is uncomplicated. The Bank offers loans (asset financing) on the assets side and obtains funding from the public to finance those loans. No complicated lending, no stocks from other countries, no equity holdings, no huge loans that can make or break the bank and no derivatives and trading on the markets. Also, there will be no interbank lending to finance these loans. AgriBank will do banking the traditional way.

The bank's model is also robust because it will attempt to minimise the normal banking risks while refusing to add any other risks. The model is based on a Sterling balance sheet, which means that we will accept Sterling funds and lend in Sterling, thus avoiding currency risk. Our interest rates are fixed for both assets and liabilities, thus eliminating interest rate risk. We also attempt to minimise maturity risk by matching the maturity of our funding with that of the lending. AgriBank has a low-risk appetite. Hence fewer risks, more robustness.

What is AgriBank's guiding ethos? How does it approach its clients, and why should they opt for AgriBank?

The bank's attitude is to run its operations with the minimum risk possible, which is why it minimises the inherent business risks and is committed to organic growth. While conscious of the fact that such a philosophy may curtail its short-term growth, the bank is confident that, with time, its low-risk model will attract the endorsement of the man in the street, to add to the interest shown by experts in the financial services sector, both locally and abroad.

AgriBank engages specialised brokers in the UK to approach farmers, who need assistance to purchase agricultural machinery to operate their businesses. Brokers send proposals to the bank, which are analysed by the bank's Credit Committee. This, in turn, decides whether the proposals are in line with the Committee's risk aptitude or not. The Credit Committee is headed by Victor Rizzo Giusti, a seasoned banker with 35 years experience in the banking sector locally, who is also a Non-Executive Director of AgriBank.

Asset financing pertaining to the UK agricultural sector has experienced an extremely low default rate over the past 10 years, with fewer than 1/20 of the default rate in the local corporate sector, on average. Most loans range between £10,000 and £70,000.

With respect to funding, the bank is open for business both locally and in the UK. Although it is a participant in the local Depository Compensation Scheme, AgriBank is not allowed to accept deposits which are eligible under the Scheme. The Bank's Fixed Term Bonds are intended to allow savers to invest in a bank that does not have to take risks to be profitable.

AgriBank launched its UK presence in the UK earlier this month. What has initial feedback been like?

Superb in relation to the modest expectations of a new bank. We have managed to attract significant attention from the UK press, such as the Sunday Times and other national papers. Also, we have launched our Fixed Term Bonds on the most popular comparison websites in the UK and the response was better than expected, certainly for a small bank like AgriBank.

On Monday, 18 March, 2013, AgriBank inaugurated its Head Office at SkyParks in Luqa. What does this represent for AgriBank?

Clearly, it represents AgriBank's home. AgriBank plc is a Maltese bank, originating from Malta and regulated in Malta. We are proud to be operating from here and will be looking to service both UK and Maltese clients in the months and years to come. The Head Office at SkyParks is operational and is equipped with all the facilities that a modern bank requires to provide the best possible service to its clients. The bank does not deal in cash and uses bank transfers as the means of fund transfer.

How big will AgriBank's Maltese operation be? How many people will it employ and what functions will it be performing?

AgriBank will operate exclusively from Malta, so the operations in Malta represent the whole bank. The bank's mentality is to focus on doing what it knows best. Hence, all core activities will be serviced solely from the Head Office, while specialised service providers both in Malta and abroad are engaged to provide assistance in non-core activities, such as marketing, PR, legal services and IT support.  The Board of Directors is led by Dr Joe Borg as Chairman and is also composed of Mr Rizzo Giusti as the other non-Executive Director, Roderick Psaila as CEO and Paul Grech as Finance Director, while Isabella Sant is Company Secretary. The bank currently has 10 employees.

Why did AgriBank opt to establish its Head Office in Malta? What attracted the bank to Maltese shores?

As explained above, AgriBank is expected to remain a small bank, and hence it needed a small jurisdiction where it could operate without being too small to be considered. From then on, it was very easy to opt for Malta, particularly when considering the EU factor, a robust and at the same time approachable regulator, the tax advantages for shareholders, the favourable 'management skill-to-cost' ratio when compared to other financial sectors in the EU, the use of English in legislation, and the ease of use of the English language by service providers.

Malta's banking and financial services sectors are recognised as very stable and robust. Did this play a part in AgriBank's decision to base itself in Malta, and how?

Yes. Without doubt, the fact that the MFSA is the Regulator in an EU jurisdiction, and being part of a stable banking sector was essential for an institution such as ours with a traditional banking model.

During these times of economic uncertainty, many are looking towards banks so that these reduce their operating risks and adopt stable risk models to maximise stability. What will AgriBank's approach be in this regard?

I perfectly agree. We would like to think that we were ahead of our time in this respect, when the model was created two years ago. Doing just one activity on both the assets' and liabilities' sides of the balance sheet certainly helps to minimise operational risk. We believe that AgriBank's traditional banking model will be positively received by the general public and could be the way forward for banks in general.

What lies in store for AgriBank for the future? Does it plan to expand its services into new markets?

We plan to make gradual organic growth the recipe for a successful future. At this point in time, there is no plan to diversify in other countries outside Malta and the UK, while in terms of industry, we want to continue to do what we know best, which is asset financing to the agricultural sector.