No court action against Bank of Valletta until all avenues are explored - MFSA

The financial regulator has reacted to claims by Finco stockbroker Paul Bonello that it lacked teeth in taking on Bank of Valletta, saying it has "never shirked its responsibilities at law" and that it will not hold back from using its regulatory powers "at the appropriate time, and not before it has explored all other available avenues."

Finco Treasury Management director Paul Bonello said his firm will be taking new legal action against Bank Of Valletta over the dispute between the bank and investors who lost savings they had poured in investments with the banks in Lehman perpetual securities.

Bonello also called on the Malta Financial Services Authority (MFSA) to initiate legal action against BOV, hitting out at the sluggishness of the government in acting over the matter. "The MFSA has a lot of competence but it lacks the courage to act upon words. I have no problem in saying that the MFSA has no character."

The MFSA is however claiming there is no guarantee that court action against BOV will result in quick payment for aggrieved investors, citing the courts' protracted cases on the compensation for depositors who are still waiting for the last 20% of their deposits in the BICAL bank, whose licence was suspended in 1973.

The Malta Financial Services Authority, which has fined BOV and its subsidiaries over €700,000 for breaches of investment rules in the sale of units in the La Valette property fund and other perpetual securities, said it has engaged a professional services firm, at the expense of BOV, to carry out an independent review of each investment in the La Valette fund.

The file review will result in a list of investors who should be paid further compensation by BOV, including those who accepted a conditional offer from the bank to relinquish any legal action in return for a 70c per share compensation.

BOV has also been "recommended" by the MFSA to compensate investors in Lehman and other hybrid and perpetual securities. While BOV has already reached a settlement with a number of those investors, in several pending cases the bank is disagreeing with the MFSA's findings, refusing to offer adequate compensation.

The MFSA findings and sanction in this area have been appealed by the Bank and the judicial process is taking its course, the regulator said.

"The Authority believes that it is right to first exhaust all possible avenues to achieve restitution, including an insistence that BOV shoulder its responsibilities towards these investors, before going to the courts," the MFSA said in a statement.