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Assisting the Business Community
11 May 2020
Trying to recall our lives back in February feels like a distant past and significantly longer than three months.  The markets have changed, economies have changed, and working approaches have changed.  Today it is clear that agility and fast decision-making in uncertainty is critical. 

Retail banks are not usually associated with fast decision making in uncertainty, however seeing the lockdown unravel through March and the impact it was having on our clients future revenue streams it was clear to us at Bank of Valletta that we needed to act fast. 

To address clients immediate needs, until the Government guarantee measures materialise in the market, the Bank issued a €10 million business assist fund.  After one week €12 million in working capital facilities were taken up with the fund being topped up to €20 million on the 26th of March 2020.  

The ability of the Bank to launch this stop gap solution entailed amending existing EU funded financial instruments in the market by tweaking eligibility criteria in collaboration with colleagues at the European Investment Fund so that current instruments can focus exclusively on working capital measures, over longer terms with more flexible moratorium periods.  This worked in the interim until the Malta Government guarantee scheme administered by the Malta Development Bank was approved by the EU Commission on the 2nd of April 2022.  

In the span of 19 calendar days Bank of Valletta structured the BOV MDB COVID Assist product based on the EU Commission approval and launched it in the market on the 21st April 2020.  This entailed extensive engagements with the Malta Development Bank to align interests, change internal operating procedures, upgrade IT systems to be able to integrate the complexities of a blended guarantee and interest rate product.  We managed to do all of the above and be first in the market to give the required signal and assistance to the business community.  

The BOV MDB COVID Assist is open to both large enterprise and SMEs offering interest rates starting from a fixed rate of 2.5% for the first two years and requesting minimal collateral, depending upon the size of the loan and associated risk, allowing the bank to respond promptly to client needs.

The decision to move fast in uncertainty did have its challenges, some details of how the schemes would operate together with certain eligibility criteria are being refined on the go, however it was clear to the Bank that we need to move fast in these exceptional circumstances to give the business community the oxygen their business needed at this point in time. 

The swift launching of innovative guarantee and interest rate subsidy products in the market by Bank of Valletta will ensure that the Maltese economy will be in a position to bounce back stronger out of these challenging times.  

More information about BOV MDB COVID Assist can be found here.

Article was published on the Sunday Times of Malta on 10 May 2020.  Written by Albert Frendo who is Bank of Valletta’s Chief Credit Office with a career in banking that spans over thirty years. He was behind the launch of Risk Sharing Instruments in Malta aimed at SMEs including JEREMIE, CIP, SMEG, SME Initiative (JAIME) and SME Invest.

Any views, assumptions or opinions expressed in this article are those of the author.  All loans are subject to normal bank lending criteria and final approval from the Bank. Interest rates will start from a fixed rate of 2.5 % for the first two years exclusive of guarantee fees. As from year three, a variable interest rate which will be inclusive of the guarantee fees*, will not exceed a 3.00% per annum over the three months Euribor rate floored at 0% for loans up to € 5 million.. Issued by Bank of Valletta p.l.c., 58, Triq San Żakkarija, il-Belt Valletta VLT 1130.  Bank of Valletta p.l.c. is a public limited company regulated by the MFSA, licensed to carry out the business of banking and investment services in terms of the Banking and Investment Services Acts (Cap.370, 371 of the Laws of Malta).  
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).