Bank of Valletta p.l.c.
Annual Report 2023
1
ANNUAL
REPORT
2023
Bank of Valletta p.l.c.
Annual Report 2023
i
CONTENTS
Chairman’s Statement
CEO’s Commentary
Board of Directors and Group Company
Secretary
Executive Committee & Group Chief
Internal Auditor
Corporate Social Responsibility
FINANCIAL STATEMENTS
Directors’ Report
Corporate governance statement of
compliance
Remuneration report
Independent Assurance Report
ESG Risk Management and Disclosures
Statements of profit or loss
Statements of profit or loss and other
comprehensive income
Statements of financial position
Statements of changes in equity
Statements of cashflows
Notes to the financial statements
Independent auditors’ report to the
shareholders of Bank of Valletta p.l.c.
The Group’s five year summary
Group financial highlights in US dollars
GENERAL INFORMATION
BOARD OF DIRECTORS
Gordon Cordina (Chairman)
Nicola Angeli
Kevin J Borg
Diane Bugeja
Elizabeth Camilleri
Kenneth Farrugia
Anatoli Grech
James Grech
Anita Mangion
Deborah Schembri
Robert Martin Suban
Godfrey Swain
Miguel Borg (resigned on 5 April 2023)
Alfred Lupi (resigned on 25 May 2023)
Alfred Mifsud (resigned on 27 April 2023)
Antonio Piras (resigned on 25 May 2023)
COMPANY SECRETARY
Ruth Spiteri Longhurst
EXECUTIVE COMMITTEE (ExCo) as at 31 December 2023
Kenneth Farrugia (Chief Executive Officer)
Ernest John Agius (Chief Operations Officer)
Joseph Agius (Chief Technology Officer)
Simon Azzopardi (Chief Personal & Wealth Officer)
Izabela Banas (Chief Financial Officer)
Ivo Camilleri (Chief Strategy, Transformation & Data Officer)
Ray Debattista (Chief People & Culture Officer)
Anatoli Grech (Group Chief Compliance Officer)
Simon Grech (Chief Commercial Officer)
Danielle Grima (Chief Risk Officer)
Theodoros Papadopoulos (Chief Digital Officer)
Roderick Meilaq (Secretary)
AUDITORS
KPMG
LEGAL ADVISORS
Camilleri Preziosi
NOTICE OF MEETING
The Annual General Meeting of the Bank will be held at the
Grand Master Suite, Hilton Malta, St Julian’s, on Friday 31
May 2024 at 10.00 a.m.
ADDRESS
BOV Centre,
Triq il-Kanun, Central Business District,
Santa Venera CBD 4060 - Malta
Registered Office:
58, Triq San Zakkarija,
Il-Belt Valletta VLT 1130 - Malta
Registration Number: C 2833
Bank of Valletta p.l.c. is a public limited company licensed to
carry out the business of banking and conduct investment
services by the Malta Financial Services Authority. Bank of
Valletta p.l.c. is an enrolled tied insurance intermediary of
MAPFRE MSV Life p.l.c. (MMSV). MMSV is authorised and
regulated by the Malta Financial Services Authority to carry
on long term business under the Insurance Business Act
1998.
Since last publication there were no changes to the name of
the reporting entity.
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Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
ii
Dr Gordon Cordina is a leading economist in the Maltese islands. He has
professional experience spanning 25 years, covering banking, policy-making,
academia and private sector consultancy. He serves as Chairman of the Board
of Directors, the ESG Committee, and the Nominations and Remuneration
Committee and is a member of the Risk Committee and the Compliance and Anti-
Financial Crime Committee.
Dr Cordina is a graduate of the University of Cambridge and the University of
Malta. His main area of academic interest is the growth and macroeconomic
dynamics facing economies that are prone to heightened risks.
Dr Cordina has several years of Board and Risk Committee experience in major
financial institutions in Malta, amongst which at Bank of Valletta p.l.c., served as
Dr Gordon Cordina
Chairman
ESG CAFC NRC R NED *
Manager of the Research Department of the Central Bank of Malta, Director General
of the National Statistics Office of Malta, Head of the Economics Department of
the University of Malta and Economic Advisor to the Malta Council for Economic
and Social Development. Through the private consultancy firm he co-founded in
2006, he is involved in a number of local and international research projects and
consultancy assignments with institutions including the EU Commission, NGOs and
private sector entities. Dr Cordina is also a visiting senior lecturer at the University
of Malta.
Dr Cordina was appointed Chairman of the Bank of Valletta p.l.c. in October 2020,
of MAPFRE MSV Life in September 2021 and Director of MAPFRE Middlesea in
September 2022.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
iii
Bank. Apart from onerous obligations and expectations from
a regulatory perspective, this systemic relevance places upon
BOV significant responsibility vis-à-vis its shareholders, the
economy, and society.
The high interest rate environment created by the ECB’s
tightening of monetary policy presented good opportunities
for BOV to optimise the returns from its assets which remained
funded by a very strong deposit base. In 2022, the Bank had
taken the decision to affect no passthrough of the ECB’s rate
hikes to domestic retail lending rates, based on its high deposit
to lending ratio. This strategy remained in place in 2023, as
this continued to be rational from the Bank’s commercial
perspective, and provided an important element of stability to
business and households alike.
weakened. However, any eventual unwinding of the tightening
cycle is likely to keep interest rates at levels which are higher
than those which prevailed throughout the decade-long period
of exceptionally accommodative monetary policy. Still, the
ongoing international geopolitical turmoil fosters uncertainty,
with ambiguous effects on inflation and posing downside risks
on economic activity, thus creating hurdles in the path towards
the normalisation of monetary conditions.
Within this backdrop, at the end of 2023, the size of BOV’s
balance sheet exceeded €14 billion, accounting for almost
half of the total assets of Malta’s core domestic banks. BOV’s
market share for 2023 was slightly above 40% with respect
to corporate loans and household deposits, and slightly less in
the case of home loans. These statistics clearly highlight the
systemic importance of BOV, making it one of the three banks
in Malta which are directly supervised by the European Central
Three economic variables defined the global economy in 2023:
high interest rates, elevated inflation, and uncertainty. Despite
these headwinds, the Maltese economy continued to grow at a
sustained pace. The resilience of the Maltese economy augurs
well for the future, but from a macroeconomic perspective,
attention is needed to safeguard fiscal sustainability, while
curbing price inflation to avoid it becoming persistent. From an
overall sustainability angle, environmental, climate and quality
of life issues are paramount.
The European Central Bank continued with its tightening cycle
during 2023, with official interest rates raised by a further 2
percentage points, cumulating to an unprecedented increase of
4.5 percentage points within a period of 18 months. It is more
probable than not that an easing of monetary policy could start
during 2024, when considering that inflation across the euro
area started to decelerate, and economic activity has generally
Chairman's statement
Economic
Variables
for 2023
HIGH INTEREST
RATES
ELEVATED
INFLATION
UNCERTAINTY
Dr Gordon Cordina
Chairman
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
iv
The country’s interest rate stability, where BOV played a
leadership role, together with the ongoing availability of
credit to both households and corporates were factors which
supported the dynamism of the Maltese economy throughout
the year. Mortgage rates offered in Malta as at the end of 2023
were the lowest in the euro area, as were average corporate
lending rates. Bank clients in Malta have thus not experienced
the same interest rate shock as in the rest of the euro area.
The resumption of a dividend payment, supported by the safety
offered by the Bank’s strong capitalisation and liquidity, was a
key accomplishment in 2023. This was a tangible sign that the
Bank is moving in the right direction, and such confidence no
doubt helped lift the share price, which ended 2023 at €1.42,
significantly higher than €0.81 at the end of 2022.
Through this stance, the Bank also aimed at nudging clients
to optimise their returns through financial products which are
better suited for their needs and thus reduce the country’s
endemic excessive household liquidity. This permitted
BOV to continue offering loans at attractive rates, without
compromising its profitability. The Bank’s high deposit-to-
loan ratio offers ample buffers and comfort that this strategy
remains adequate, profitable, and prudent for the foreseeable
future.
The Group’s total profits before tax amounted to €251.6 million
in 2023, representing a very healthy pre-tax return on equity
of 21%. To sustain profitability over the longer term, the Bank
has been actively restructuring its balance sheet, through the
redeployment of treasury funds into longer term assets, and a
productive expansion in good-quality credit. The aim is to lock
in the advantageous rates offered by the current high interest
rate environment, thereby supporting net interest income over
the long term. This makes the Bank less exposed to cyclical
fluctuations in rates and thus generate a more stable positive
performance over time. In turn, this can ensure that every year,
sufficient internal financing is available to strengthen the capital
base to support future growth, while providing a predictable
and stable source of dividends for our shareholders.
2022
SHARE PRICES
2023
€0.81 €1.42
In 2023, Malta’s real GDP grew by 5.6%, which was higher
than original expectations, demonstrating the strong economic
momentum despite the headwinds from abroad. Growth was
broad-based, with both industry and services performing
strongly, the latter underpinned by a record year for tourism
in terms of arrivals. These conditions fuelled further growth in
jobs and brought the unemployment rate down to historically
low levels, factors which reinforced confidence and supported
household consumption. Against this background, inflationary
pressures in Malta started to abate during the second half of
the year, but remained above the country’s normal readings,
reflecting sustained demand, tight labour markets and other
cost push pressures.
The available economic forecasts for Malta suggest that over
the next years, economic growth will converge towards the
country’s long-term average, in the region of 4% per annum,
which remains higher than the euro area average. The economic
outlook thus remains overall benign, auguring well for BOV’s
future financial performance.
GDP
+5.6%
UNEMPLOYMENT
rate went
DOWN
The degree of fiscal assistance mainly resulting from the
pandemic has been instrumental in mitigating shocks originating
from abroad. Such assistance is planned to continue over the
coming years, reflecting the Government’s stated intention
to extend its policy to continue absorbing the international
energy price shock via subsidies. As a result, the Government
is anticipating that the fiscal deficit will remain above 3% of
GDP for some years, although the planned gradual reduction
over time should ensure that the European and national fiscal
rules would be still respected. On a positive note, the nominal
expansion in GDP is expected to preserve Malta’s public debt
ratio within 60% of GDP, which is much lower than the euro
area average. Experience has shown that a low public debt
ratio allows the Government leeway to step in decisively in the
wake of large shocks. In a very small open economy, it makes
sense for the Government as well as the financial sector to
dampen temporary external shocks, as this stability can be
highly conducive to long-term economic wellbeing.
In 2023, the Board approved BOV’s updated strategy for the
2024-2026 period. Among its chief priorities, the strategy
emphasises Environmental, Social and Governance (ESG)
considerations. The Bank aspires to lead Malta’s transformation
in this area, not only in sync with more onerous future
regulatory requirements, but even more ambitiously, to help
steer behaviour along a sustainable path. Placing ESG at the
core of our operations can ensure that the Bank becomes
increasingly focused on providing the right products and
incentives to improve wellbeing in a sustainable way. The Bank
has already started, and will continue placing greater emphasis,
on green credit.
EnvironmEntal GovErnancESocial
ESG
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
v
The Bank’s activities in the field of Corporate Social
Responsibility (CSR) also remain a priority. BOV wants to be
a compliant and responsible corporate citizen. The Bank will
remain at the forefront in the fight against financial crime,
building on the strong drive and investment which was
necessary to help Malta come out of the FATF’s grey listing in
2022. In turn, the deployment of technology across the Bank
is considered key to improve productivity, while meeting the
expectations of clients in a more tech savvy world. Striving for
higher productivity is a win-win strategy, as it allows higher
remuneration but at the same time better cost control, thus
benefiting all stakeholders.
BANK’S
TARGET
LEADER
INNOVATOR CATALYST
29 BRANCHES
offering all services
4 AGENCIES
offering deposit
services
1 SUB AGENCY
1 WEALTH
MANAGEMENT
CENTRE
5 INVESTMENT
CENTRES
1 CORPORATE
FINANCE
CENTRE
5 BUSINESS
CENTRES
BANK
OF
VALLETTA
In conclusion, 2023 has been a very positive year for Bank
of Valletta Group, which registered healthy profits in a
situation of positive interest rates, while no longer shackled
by legacy impediments and risks. I thank our shareholders
for their continued support, the executive team and staff for
their valuable work and commitment to improve the Bank’s
performance during 2023. In 2024, BOV will be celebrating its
50th anniversary and as we reach this milestone, our ambition
is that as an institution we remain vibrant, relevant, competitive,
and dynamic. Our polar star is to be a leader and innovator in
the financial sector and a catalyst for positive change.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
vi
Kenneth Farrugia is the Chief Executive Officer of Bank of Valletta Group. He
sits on the Bank’s Board of Directors, chairs the Executive Committee and is a
member of several management committees. Mr Farrugia is also a director on
the Board of Directors of BOV Fund Services Limited, BOV Asset Management
Limited and MAPFRE MSV Life plc.
Mr Farrugia began his career at Bank of Valletta in 1985 and has occupied various
executive positions covering the Bank’s asset management, retail banking and
credit business areas. Over the course of his career, he has also held various
financial services related industry positions, including Chair of the Malta
Asset Servicing Association, Board Member of the European Fund and Asset
Management Association, Chair of FinanceMalta, Malta’s national promotional
body for the financial services industry as well as Chair of Malita Investments plc,
which is listed on the Malta Stock Exchange.
Kenneth Farrugia is an alumnus of Harvard Business School having completed the
General Management Program.
Kenneth Farrugia
Director & CEO
ED
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
vii
CEO's Commentary
Kenneth Farrugia
Chief Executive Officer
Record results registered over 2023 as we journey from good
to great.
Bank of Valletta’s financial performance over 2023 was
undoubtedly one of the best experienced during its 50-year
history, with strong income growth achieved across all the core
business lines. These positive results were registered in a backdrop
of a high interest rate environment, geopolitical tensions, high
inflation, and tightening monetary policies across the euro area
which are already referred to in the Chairman’s Statement.
The increase in interest rates, strength of our balance sheet,
our robust risk management framework, and organic growth in
core business lines were all key enablers of the financial results
registered during the year. This year’s results have in turn further
strengthened the Bank’s balance sheet position where liquidity
and capital ratios remain well above regulatory requirements.
Before I deepen my review of our performance achieved in 2023,
I want to thank my Executive Management Team, as well as our
Board of Directors for the unwavering support and commitment
that they have extended during the year. I equally wish to
recognise the circa 2300 employees, with whom we, as a team,
strive every day to fulfil our purpose and support our clients in
their banking and financial services requirements.
I would also like to extend my sincere appreciation to each one
of our customers whose trust and loyalty are pivotal to our
achievements. As we progress together, I want to assure you that
your welfare will always be at the forefront of everything we do
and is invariably our top priority. We are committed in aiding you
in your financial journey, whether you are meeting your day-to-day
service exigencies, saving for your retirement, buying your first or
second home or planning for, or embarking on a new business
venture.
During this year, we have strategically and operationally focused on
a number of key foundational areas that have markedly contributed
to the results achieved this year. A brief summary follows.
KEY ENABLERS OF THE
FINANCIAL RESULTS 2023
INCREASE IN
INTEREST RATES
STRENGTH
OF OUR BALANCE
SHEET
ROBUST RISK
MANAGEMENT
FRAMEWORK
ORGANIC GROWTH
IN CORE BUSINESS
LINES
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
viii
Deeper Insights at 2023
Customer Service Excellence: Aiming for New Heights
Over this year we have continued to intensify our commitment
to improve and strengthen the delivery of a high-quality service
experience to our customers. By focusing on defined target
markets, optimising our service channels and developing our
product suite, the Bank’s team managed to drive innovation and
deliver growth across both our commercial and personal banking
arenas.
We firmly recognise that the banking landscape is evolving
rapidly, shaped by technological advancements, shifting
consumer expectations, and economic trends. In an era where
financial services are increasingly standardised, we recognise
the significance of cultivating genuine relationships with our
customers. On this front, the Bank has launched various initiatives
that have strengthened the service experience of our customers
as measured by the various customer surveys which are monitored
very closely. On the service channels front, the Bank introduced
extended opening hours for our customers in select branches as
well as preferred opening times for our elderly clients. We have
also registered marked improvements at our Customer Service
Centre following various initiatives undertaken by the management
team. Insofar as our commercial business is concerned, we have
managed to record very strong growth in our Corporate, SME and
Trade Finance Business on the back of streamlined processes and
stronger engagement with our customers.
Digitalisation of our Operational Model: Prepared for the Present
and the Future
Our drive to achieve operational excellence is allowing the Bank
to reduce costs by eliminating inefficiencies and at the same time
deliver improvements in our customer experience. During this
year, as part of our Business Process Re-Engineering program,
we have managed to reduce various operational risks opting
for faster and more efficient ways of delivering services to our
customers or executing internal processes. The launch of a digital
channel which allowed our customers to update the information
and documentation held with the Bank from the comfort of their
home was very well received as were various other initiatives such
as the automated appointment booking system, the introduction
of a chatbot on our digital channel, the work carried out on the
new Bank’s website, launch of a new intranet site, and ability to
service customers online for their home loan requirements. The
improvement in our operational model has in turn also allowed
us to strengthen our sustainability by reducing utility costs
through smart lighting and building management systems, as
well as initiatives to reduce paper usage as we take forward an
organisation-wide paperless project.
The digitalisation of our operational model remains a very high
priority for the Bank and various initiatives are in progress to ensure
that across our physical, digital and hybrid channels we deliver the
service experience expected by our customers and at the same
time enable our customers to self service their requirements.
Risk Management: Ensuring Responsible and Sustainable Growth
Our strategic and business plans are developed within the context
of the Bank’s overarching risk appetite framework. Whilst we
strive to grow our business, we are equally focused with the same
intensity to manage the various risks faced by our organisation
ensuring that we integrate risk and opportunity in processing
business led applications.
During 2023, we have continued to invest in various platforms to
strengthen our risk control framework. This is allowing us to test
our resiliency in the event of volatile and uncertain times ensuring
the Bank is well prepared from both a liquidity and capital angle
bearing in mind the Bank’s systemic importance.
When engaging with our clients, we are actively driving the
sustainability agenda and supporting them with competitive
financing terms for their projects to help them transition to a
low carbon economy mindful of the importance of climate and
environmental risks. In this area we have intensified our efforts
to assess the associated credit risks in our financing business line.
Our drive to meet the net zero greenhouse emissions before
2050, has also led us to organise a number of educational sessions
with our clients to help us understand their transition plans and
identify solutions to support them in the process.
CUSTOMER
SERVICE
EXCELLENCE
DIGITALISATION OF
OUR OPERATIONAL
MODEL
RISK
MANAGEMENT
OUR
PEOPLE
RESPONSIBLE &
SUSTAINABLE
GROWTH
KEY
FOUNDATIONAL
AREAS
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
ix
Our People: At the Centre of our Value Proposition
The Bank’s longstanding culture of caring for its customers, and
the ability to support one another in a connected manner in the
process has always set Bank of Valletta apart from other operators
in the market. Likewise, our human capital is of critical importance
to the Bank and resides at the very centre of our strategy ensuring
that our team members can grow and thrive throughout their
career.
Retaining talent is core to how our company drives responsible
growth, including our commitment to being a great place to work
at aiming to position ourselves as Malta’s leading onboarding,
education and professional development organisation. Apart
from the BOV Training Academy to support the learning and
development needs of our employees in terms of our consumer
and business banking trends and realities, we have over time
expanded the program to provide training programs aimed at our
support and control functions. Employees can today develop their
skills for both their current role or a role they want to pursue in
the future.
The training team is focused to ensure that we have a high-class
onboarding, reskilling as well as upskilling training experiences
ensuring in the process that the organisational culture resides at
the very centre of our program focusing on our core values and
performance behaviours.
Employee wellness initiatives aimed at supporting our people to
handle stress, manage conflicts, adversity and dealing with grief
in a positive healthy way has also been a core focus area for our
People and Culture Division. The long-term financial wellness
of our employees is equally important and we are pleased with
the strong participation in the Bank’s Voluntary Occupational
Retirement Scheme. The Bank has also launched a Diversity and
Inclusion program which is being driven by our own employees
within our own organisation.
We have also strived in the process to recognise and reward
performance with competitive remuneration ensuring in the
process that we maintain robust policies and practices that help
reinforce equal gender pay. For our executives and management
team, the internal and external development programmes in
place are allowing us to cultivate their skills and strengthen our
succession planning through the identification and development
of future leaders.
Responsible and Sustainable Growth: Meeting our ESG Obligations
Another important focus for the Bank continues to be the
sustainability aspect which remains at the forefront of our
operations. We are driven by a firm understanding of our
obligations towards not only the communities we engage with
but also future generations. While we acknowledge the current
climate and environmental challenges, we firmly believe that these
actually are providing us all with a unique opportunity to induce
meaningful change for the better.
Apart from the various initiatives that we have undertaken as an
organisation to reduce our carbon footprint, we are also helping
catalyze efforts at national level by convening various discussion
forums focused on driving and accelerating progress on the ESG
front. In the process, we have introduced and deployed various
green products both on the commercial and personal financing
side as well as a suite of sustainable investment solutions for our
customers.
Financial performance of the Group
In the year 2023, BOV Group has demonstrated a compelling
financial performance generating a profit before tax for the year
of €251.6 million compared to €49.1 million registered in 2022,
with the latter being restated to take into effect a €357 thousand
adjustment related to profits derived from insurance associates
following the introduction of IFRS17. This positive performance
was attributable to a focused approach both from a revenue and
costs perspective, with operating income increasing by more
than 50% year on year and costs increasing by a much smaller
percentage of 9.5%. This resulted in a solid improvement in terms
of the cost to income ratio which was down by 17.8% to 47.8%
over the year. The Group’s performance in 2022 was affected by
the resolution out-of-court of the Deiulemar case which impacted
the bottom line by around €103 million. Comparing the year’s
Profit before tax (‘PBT’) to the previous adjusted equivalent figure
and excluding the effects of the latter settlement (adjusted PBT of
€152 million), one notes a 65.5% increase in PBT performance for
financial year 2023.
i. Operating Income
BOV Group has experienced a significant increase in operating
income primarily due to the enhancement in net interest income
for the year 2023. Overall, total operating income amounted to
€441.0 million, an increase of €147.6 million or 50.3% over the
prior year (2022: €293.4 million).
Net Interest Income
Net Interest Income remained the primary driver of operating
income, totalling €352.0 million, a surge of €150.1 million or
74.3% when compared to €201.9 million in the preceding year,
reflecting consistent growth in customer lending and proprietary
investment portfolios.
There was substantial progress in business banking lending,
propelled by a robust increase in volumes and a favourable shift
in interest rate differentials. Additionally, home lending yielded
consistent returns, albeit at a lower effective interest rate.
The Group has capitalised on persistent market opportunities
in treasury investments at better yields and within the Bank’s
appetite. Furthermore, the sustained positive Eurozone interest
rates facilitated income generation from liquid assets throughout
2023.
During this financial period there was also a rise in interest
expense, primarily resulting from the issuance of the 10% Callable
Senior Non-Preferred Notes by the Bank in 4Q 2022 to meet
regulatory obligations.
Net Fees and Commissions, Exchange and other revenues
An increase of €1.4 million was registered on Net Fee and
Commission income for a total yearly amount of €78.0 million
(2022: €76.6 million). Good results were registered on all
commission streams related to credit activities, where the Bank
achieved a very good performance both on the commercial and
retail portfolio. This was counteracted by the discontinuation
of high balance fees for corporate clients, reduced income
from cheque usage as the Bank continues to transition to more
digital channels, as well as reduced income derived from fund
management and bancassurance, with the latter two business
lines continuing to be negatively impacted by the persistent
influence of the high interest rate environment. A decline was
also registered in net commissions derived from the card business
mainly as a result of narrowing margins driven by high competitive
pressures.
Total non-interest income for the year amounted to €89.0 million,
marginally down by €2.5 million or 2.7% when compared to prior
year (2022: €91.5 million). Such decrease is mainly attributable
to a decline of €6 million in trading profits relating to foreign
exchange and adverse fair value movements.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
x
ii. Costs
The aggregate expenses excluding strategy related costs for the
year totalled €199.9 million (2022: €184.8 million), reflecting
an increase of €15.1 million or 8.2% compared to the amounts
recorded in 2022. The Group’s ongoing pursuit of talent
enrichment, enhanced compensation and benefits, continuous
investment in technology and the delivery of digital channels,
regulatory compliance investments, as well as the effects of
inflation all contributed to the sustained growth in operating
costs. These rises were partially offset by lower contributions to
the Depositor Compensation Scheme.
The execution of our strategic initiatives remained swift, and the
Bank allocated an additional €11.0 million in investments in 2023
(2022: €7.8 million).
iii. Releases of Credit Provisions
The asset quality of the credit portfolio remains an absolute
priority for the Bank with positive yearly variances being registered
in the main ratios and with results being in line with the target
trends. The BOV Group maintained vigilant oversight over all asset
quality metrics with particular attention being placed on the non-
performing exposures portfolio (‘NPE’). As at 31 December 2023,
the NPE ratio stood at 3.1%, down by more than 40bps when
compared to the 3.5% outstanding a year earlier, with the decrease
amounting to €11.9 million in terms of absolute amounts.
Over the year under consideration, a release of €10.5 million
was registered in terms of net Expected Credit Losses (‘ECL’)
(2022: €49.1 million release). The magnitude of this release
reflects largely the effects of the Non-Performing Loans (‘NPL’)
sale executed by the Bank in 4Q, which is considered a first in
the local banking sector and which resulted in a €17.5 million
reversal of allowances, which were previously booked against
such exposures. Apart from the NPL sale transaction, the Group
incurred a net impairment charge of €7.1 million. The latter was
influenced by various factors, including the implementation of the
new retail ICRS (explained below), adjustments being derived from
the annual model calibration process, as well as shifts in credit
portfolio volumes, and collateral coverage. The ECL coverage of
the credit impaired assets decreased to 43.9% during the twelve
months mainly because of the NPL sale transactions which were
highly provided for and which have now been removed from the
portfolio (2022: 53.8%). The latter is counteracted by the fact that
the NPL vintage has also reduced materially through the removal
of such legacy assets.
The main change effected during the year from a credit risk
perspective related to the successful implementation of the
new internal credit grading model (‘ICRS’) for the retail portfolio
which was introduced in June 2023. This followed the successful
deployment of the Commercial Portfolio ICRS which had been
rolled out to production in December 2022. The introduction of
such risk-based grading models is deemed to be very beneficial
from a risk perspective since it allows the Bank to segment its
credit portfolio in a more scientific and risk-based manner. Such
models have been fully integrated within the Bank’s Credit
Management Framework architecture and serve as a direct input
in the ECL model, with the enhancements directly bolstering the
probability of default measurement dimension.
iv. Share of Profit from Associates
The Group’s share of profit from insurance associates for the
year resulted in a profit of €11.0 million (2022: €2.2 million profit
as restated). The Group’s profits for the comparative year were
adjusted by €357 thousand in share of results from insurance
associates, increasing the share of profits as had been reported in
the previous year. This outcome is due to the Group’s associated
companies implementing IFRS 17, an accounting standard that
introduced a fresh approach to valuing insurance contracts.
Balance Sheet Position
The Group’s Total assets remained practically on the same levels
of the previous year at €14.51 billion as at 31 December 2023
(2022: €14.47 billion). Material shifts were noticed between line
items especially between balances held with central bank moving
to investments and lending, as the Bank seeks to optimise long
term returns. Customer deposits continue to be the primary
funding source of the Bank with more than half of these relating
to retail deposits. At the end of 2023, customer deposits stood
at €12.2 billion, marginally lower than the previous year’s €12.5
billion and confirming the stickiness of such deposit base. These
developments have led to a favourable increase in the Bank’s
gross loan to deposit ratio from 46.0% in 2022 to 51.7% at the
end of 2023, in line with the Bank’s strategic objectives.
Sustainable management of excess liquidity was maintained
during 2023, with cash and short-term assets decreasing by
circa €1 billion, a reduction of around 31% over the 2022 closing
position. These funds were utilised to fuel further net growth in
the loan book, €511.7 million, followed by further investments in
treasury securities.
Investments increased by €786.0 million or 17.2% with the vast
majority measured at amortised cost reflecting the Bank’s primary
business model to hold securities until maturity with a view
to collecting interest revenues over the life of the investment.
Effective rate of return on treasury investments improved from
0.47% in 2022 to 1.57% in 2023 with the increase mainly driven
from securities at amortised cost in local currency.
Net loans and advances to customers as of 31 December 2023
reached €6.1 billion, an increase of nearly 10% when compared
with the €5.6 billion of December 2022. Both the commercial
and retail business lines registered a very positive year in terms of
growth and also in terms of related revenues.
€441.0 million
OPERATING INCOME
+ 50.3%
€352.0 million
NET INTEREST INCOME
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement
CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xi
A good part of this growth was attributable to green lending, where
the Bank is placing high emphasis by issuing specific products
and offering pricing discounts where financing investments are
deemed to be sustainable in nature.
The Group’s liquidity ratio as at year end stood at 362%, down
from 426% as the end of 2022. This drop reflects the decrease
in liquid assets year on year as these were transformed into
investments yielding a more profitable return. Notwithstanding,
the Group’s liquidity position remains significantly above the
minimum regulatory requirement.
The capital ratios remained strong and above regulatory
requirements, with the CET 1 and total capital ratios as at 31
December 2023 of 22.66% (December 2022 21.79%) and
25.94% (December 2022: 25.39%), respectively.
Strategy Update: New Strategic Plan 2024-2026
The year 2023 marked the closing period of the 3-year strategy
that the Bank had embarked upon in 2020, when the Board
had approved a 3-year strategy that planned to take BOV on a
forward-looking transformation journey and the preparation of a
new strategic plan for FY 2024-26.
As we draw a close to the current 3-year plan, despite a number of
external factors that posed several challenges, such as the Covid
pandemic, litigation, Malta’s grey listing and the Ukrainian crisis,
the Bank managed to continue moving forward with its strategic
ambitions related to digitalisation, process simplification, customer
centricity and product diversification.
During this period, substantial investments in regulatory
and business projects were necessary and these have been
implemented together with several other initiatives related to
service delivery using the latest techniques to provide low-cost
high speed improvements. The Bank has also been re-engineering
its processes to deliver service enhancements while providing
customers with more efficient alternative channels.
We are pleased to see this resulting in continued migration
from traditional to more modern alternative digital channels and
digital payments, the latter experiencing double digit percentage
increases.
Through digitalisation, we have also seen early signs of benefits in
terms of faster growth of the Bank’s investment and particularly
lending businesses. One such initiative was the launch of the
Home Loans digital portal, which has improved customer service
delivery while easing the administrative processing pressure at the
front line. We also introduced a new digital channel that allows
customers to update their personal information without having
to personally visit one of our branches. We have also invested
in various back-office processes to deliver greater operational
efficiency more robust controls and reducing complexity without
impacting customer service.
On another note, the branch modernisation programme kicked off
in 2021 and is making good headway. Five branches are now fully
renovated with a refreshed, eco-friendly, and customer-centric
layout. Additional branches across the network will undergo
similar renovation in the coming months.
We have also been true to our ESG commitments on a number
of fronts. We have been reviewing our environmental impact
and have already identified areas that impact the climate and
the environment, implementing various initiatives to reduce our
carbon footprint and aligning the CSR programme to further
benefit the environment. On the governance side we have been
supporting our customers to make this important transition. We
have been have been offering green financing and investment
solutions to make this a reality, with further plans to expand on
this offering in future.
Another area the Bank has worked on over this 3-year period, is
the enhancement of internal data capabilities so we can better
understand and pre-empt the needs of our customers. Several
data quality initiatives will continue to be taken forward, which
will support future product development and customer value
propositions.
Going forward, the Board of Directors has approved a new strategy
for the next three years to 2026. The key strategic thrusts revolve
around our personal and business customers, digitalisation of our
operational model, further strengthening our risk management
control framework and enhancing the Bank’s human capital.
In parallel, the Bank will be supporting initiatives in these areas
by investing in our data management and analytical capabilities,
digitalisation as well as embedding ESG in our business and
operational model.
Closing statement
As we embark on the 2024 journey together, let us reinforce our
common vision, principles, and determination to ensure that the
upcoming year is marked by continued growth, achievements,
and meaningful contributions. I extend my heartfelt gratitude
to our devoted employees, valued customers and respected
shareholders for your commitment, passion, enthusiasm, and
unwavering support.
On behalf of my Executive Team, team members across the
organisation, and the Board of Directors, I wish to thank you for
the support you extend to Bank of Valletta. Together, we will script
the next phase of our voyage towards success as we journey from
good to great.
ENVIRONMENTAL
to strive towards net
zero impact and climate
resilience
GOVERNANCE
to enhance awareness and
positive action at all levels of
the organisation with respect to
ethical and fair behaviour.
SOCIAL
to take responsibility for
the empowerment of
financial literacy and suppost
vulnerable members of
society
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xii
Dr Gordon Cordina
Chairman
Kenneth Farrugia
Chief Executive Officer
Executive Director
Nicola Angeli
Non Executive Director
Kevin J Borg
Non Executive Director
Dr Diane Bugeja
Non Executive Director
Elizabeth Camilleri
Non Executive Director
Anatoli Grech
Executive Director
James Grech
Non Executive Director
Anita Mangion
Non Executive Director
Deborah Schembri
Non Executive Director
Dr Robert Martin Suban
Non Executive Director
Godfrey Swain
Non Executive Director
Dr Ruth Spiteri Longhurst
Group Company Secretary
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xiii
Dr Diane Bugeja
Director
CAFC NRC NED *
Dr Diane Bugeja currently chairs the Compliance and
Anti-Financial Crime Committee and is a Member of the
Nominations and Remuneration Committee. Dr Bugeja is a
lawyer by profession practising primarily in financial services
law, financial regulation and anti-financial crime compliance.
She is currently a Senior Associate at Camilleri Preziosi
Advocates. Prior to joining Camilleri Preziosi, Dr Bugeja held
the post of Senior Manager at a Big Four audit firm, working in
Malta and in London, and subsequently joined the enforcement
departments of the UK Financial Conduct Authority and the
Malta Financial Services Authority.
Dr Bugeja holds a Ph.D in law from King’s College London and
a M.Sc from the London School of Economics and Political
Science. Dr Bugeja is also a visiting lecturer at the University
of Malta.
Appointed to the Board in December 2019.
Nicola Angeli
Director
A NED *
Mr Nicola Angeli is currently member of the Audit Committee.
He has an extensive knowledge of the European banking
sector, accumulated in over 10 years of experience working on
transactions in the private and public markets.
Based in Italy, he started his career in the Debt Capital Markets
team of UniCredit S.p.A., where he assisted medium and large
corporates in the execution of financing transactions in the
fixed-income market. In 2015 he moved to his current position
in the Group M&A and Corporate Development team, where
his responsibilities focus on the carrying out of M&A proprietary
transactions for the UniCredit Group. Mr Angeli was involved
in several transformational inorganic projects, including both
M&A and capital markets deals.
Mr Angeli has a significant knowledge of the European financial
sector across several geographies (e.g. Italy, Germany, Central
and Eastern Europe) and sectors (e.g. retail and corporate
banking, investment banking, consumer finance and other
product factories).
Mr Angeli has a Master Degree cum laude in Banking, Business
and Financial Markets and a Bachelor of science cum laude in
Economics, both from the University of Trento (Italy).
Appointed to the Board in August 2023.
Elizabeth Camilleri
Director
ESG NED *
Ms Elizabeth Camilleri is a Member of the ESG Committee. She
is a digital growth and transformation specialist, working with
boards and C-Level executives across a number of B2C and
B2B2C sectors worldwide.
Born and educated in Malta, Ms Camilleri subsequently moved
to the UK for her MBA at London Business School specialising
in strategy and digital innovation. It was there that she found
her passion for data and digital transformation and its power
to enable any organisation to compete in a fast-changing
environment.
Ms Camilleri currently sits on a number of boards and
advises others on digital transformation and the creation of
exponential growth through the use of data and technological
innovation. Before that, she had founded and built a market
tech company (Shopological) which she sold in 2019. Previous
roles encompassed working at global organisations such as
Gartner (Head of Strategy Consulting), Orange Global (Growth
Strategist for the Board), PWC (Consultancy, Malta) and mid-
sized companies such as eDreams (Marketing Director) and
Biochemicals (Malta, Export Marketing Manager).
Appointed to the Board in May 2021.
Kevin J. Borg
Director
NRC NED *
Mr Kevin J. Borg is an accomplished professional with almost
25 years experience in leadership of the business community
with the Malta Chamber of Commerce, Enterprise and Industry,
having occupied the position of Director General for almost 15
years and various other roles within the Chamber prior to that.
Over the years, though these positions, Mr Borg built himself
a distinct reputation for integrity and professionalism with all
stakeholders he has connected with including entrepreneurs,
political leaders and social partners.
Mr Borg is currently Member of the Nominations and
Remuneration Committee. He was previously a Member of
the Compliance and Anti-Financial Crime Committee. Mr
Kevin J. Borg is also the the Chief Executive Officer of the
Malta Maritime Forum and Consultant to the Malta Employers’
Association.
Through his previous position, Mr Borg sat on a number of
national boards including the MCESD, MEUSAC, Education
Malta, Malta Business Bureau, and the Retail Price Index Board
besides BusinessEurope and Eurochambres at the European
level. Amongst other projects during his time at the Chamber,
Mr Borg was actively involved in the EU accession preparations
for Malta as well as in the merger process with the Federation
of Industry which took place in 2009.
Appointed to the Board in May 2021.
Anatoli Grech
Director
ED
Mr Anatoli Grech holds the position of Group Chief Compliance
Officer. He previously held the position of Head of Strategy
and Regulatory Affairs at BOV Asset Management Limited
(BOVAM), the asset management of the Bank.
Mr Grech is also a Member of the Bank’s Executive Committee,
as well as the Internal Control and Risk Management
Committee, Product Governance and Pricing Committee and
Change Management Committee of BOV.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xiv
Deborah Schembri
Director
A R NED *
Ms Deborah Schembri currently chairs the Audit Committee and
is a Member of the Risk Committee. Ms Schembri is a Certified
Public Accountant, holds a Masters in Business Administration
from Henley Management College (UK) and holds an Advanced
Diploma in Retirement Provision pursued with the UK Pensions
Management Institute.
Ms Schembri served as the Chairperson of the Malta Association
of Retirement Scheme Administrators and possesses successful
Anita Mangion
Director
ESG CAFC NED *
Ms. Anita Mangion was appointed as Non-Executive Director
to BOV’s Board in December 2016. Since then, she served
in various committees: Audit, Remuneration and Compliance
Committee as well as chaired the Digitilisation and Fintech
working groups and co-chaired the Strategy Advisory Group.
Ms Mangion is currently a Member of the Compliance and Anti-
Financial Crime committee and ESG committee. In November
2021, Ms Mangion was appointed Non-Executive Director on
the boards of Vilhena Funds SICAV and the BOV Joseph Calleja
Foundation.
Ms Mangion is an experienced Strategy and IT consultant:
specialised in Corporate Governance, Business Optimisation
and Digital Transformation; passionate on ESG, FinTechs and
Innovation. For almost two decades, she consulted in such
matters diverse local and international entities where she
successfully drove enterprise-wide projects and implemented
sustainable profitable frameworks. Her professional career
started at MFSA and the Malta Stock Exchange before
moving to senior roles in the Telecoms and IT sector and
subsequently to advisory, where she now collaborates with
Tech Giants, C-suite executives and boards. Ms. Mangion
holds an Executive MBA (eBusiness); B.Com. Management
Hons and B.Sc. Business and Computing (University of Malta).
She also studied Business and IT at Indiana University-USA;
Technology Entrepreneurship and New Business Operations
at University of Malta in collaboration with Oxford University-
UK. She served as Non-Executive Director at Malta Industrial
Parks Limited (today named INDIS) from 2013 to 2017, where
she was appointed member of the Tenders Committee, Audit
Committee and chair of the ICT Steering Committee.
Appointed to the Board in December 2016.
Dr Robert Martin Suban
Director
R NED *
Dr Robert Suban currently chairs the Risk Committee. Dr
Suban is a full-time academic and Head of the Department of
Banking and Finance at the University of Malta. He lectures
at undergraduate and post-graduate level on subjects related
to banking and finance. He holds a Bachelor in Business
Administration, a Masters Degree, and a Ph.D. in Accounting
and Finance from the Alliance Manchester Business School. He
has also completed the ACCA qualification.
Dr Suban regularly attends and presents his research at various
internationally peer-reviewed academic conferences in the
area of banking and finance.
Dr Suban has considerable experience as a practitioner having
worked at the Central Bank of Malta, Jobsplus and a leading
private travel organisation in Malta. Currently, he is a non-
executive director of Malita Investments p.l.c.
Appointed to the Board in May 2023.
James Grech
Director
NED
Mr James Grech’s career commenced as a management accountant
with a local accounting firm. He later joined the Bank in 1998 and
is currently the Executive Head of Foreign Bank Relationships
Department. He served on the Compliance, Risk Management
and Audit Board committees. He was also a Member of the ALCO
management committee. Mr Grech was the Chairman of Malta
Industrial Parks and to date is the Chairman of Gozo Channel
Holding Company Limited and a Director of other local companies.
He holds an Honours Degree in Management and a Masters in
Business Administration from Henley Management College (UK).
His dissertation focused on the effectiveness of Board Performance
and Corporate Governance. Mr Grech has lectured on Financial
Services at the Malta College of Arts, Science and Technology, and
on Corporate Governance at the University of Malta.
Appointed to the Board in 2004 till 2008. Re-appointed to the Board
by the shareholders in the respective AGMs in December 2014 to date.
experience in strategy formulation, corporate governance,
business & product development, customer relationships and
employee engagement. She has over twenty years experience
in the financial services, gaming, caring, construction & property
development, oil & fuel, transport, pest control, hospitality &
travel industries, holding C-level positions. She worked with one
of the Big Four audit firms and for ten years she also served as
the CEO & Managing Director of a financial services organisation.
Currently Ms Schembri holds the role of Group CFO of a major
local diversified group of companies operating locally and
internationally and also sits on committees within the Malta
Chamber of Commerce and the Institute of Financial Services
Practitioners.
Appointed to the Board in June 2022.
Mr Grech is a Director on the Board of BOVAM and the Chair of
the Risk and Regulatory Committee of BOVAM and BOV Fund
Services Limited.
Mr Grech is also a Member of the MAPFRE MSV Life plc
Risk and Regulatory Committee. He is also a Member of the
Markets Regulation Committee and Prudential and Supervision
Committee of the European Savings and Retail Banking Group
and a Member of the WSBI-ESBG Task Force on AML.
Appointed to the Board in August 2023.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xv
Dr Ruth Spiteri Longhurst
Group Company Secretary
Dr Ruth Spiteri Longhurst was appointed the Group Company
Secretary in April 2016. She previously occupied the post
of Executive Head of the Bank’s Compliance unit. Dr Spiteri
Longhurst is also the Company Secretary of MAPFRE MSV Life
p.l.c., BOV Asset Management Limited and BOV Fund Services
Limited.
Dr Spiteri Longhurst graduated with a Doctor of Laws from the
University of Malta in 2001 and obtained a Master of Arts in
Financial Services in 2004. She joined the Bank in 2002.
A Audit Committee
CAFC Compliance and Anti Financial Crime Committee
NRC Nominations and Remuneration Committee
ESG Environmental, Social, and Governance Committee
R Risk Committee
ED Executive Director
NED Non-Executive Director
* Independent
Godfrey Swain
Director
A ESG NED *
Mr Godfrey Swain is a Member of the Bank’s Audit Committee,
ESG Committee and a Director on the Board of MAPFRE MSV
Life p.l.c. and Mapfre Middlesea p.l.c. He is an international
executive with thirty years of banking experience, recently serving
as CEO of Myanmar Citizens Bank (MCB) based in Yangon tasked
with executing a banking transformational strategy in partnership
with the International Finance Corporation (IFC), an arm of the
World Bank. Mr Swain previously served as Deputy CEO, Head of
Retail Banking and Marketing based in Ho Chi Minh City delivering
a growth and modernisation mission for Vietnam International
Bank (VIB), a large-scale bank with Vietnamese and Australian
shareholding.
Mr Swain served as a senior Hong Kong and Shanghai Bank
(HSBC) international executive for twenty years holding key roles
as Managing Director and Country Head of Retail Banking and
Wealth Management for HSBC in Japan, Vietnam and previously
Malta where he also held roles of Head of Marketing and
Communications and founding CEO/MD of HSBC Life Assurance
(Malta) Limited. Mr Swain was a member of the Hong Kong
based HSBC Asia Pacific Regional Management team, director on
various boards including Life Assurance and Fund Management
subsidiaries and EXCO, ALCO, Risk Management and Governance
Committee member in the countries and territories where he
worked. Mr Swain started his financial services career in Adelaide
and Sydney with National Mutual Life, Australia.
Mr Swain is a business graduate from Monash University, holds
a Diploma in strategic management from Henley School of
Management and participated in HSBC executive programmes in
London, Hong Kong and Singapore.
Appointed to the Board in May 2021.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xvi
Anatoli Grech
Group Chief Compliance Officer
Izabela Banas
Chief Financial Officer
Kenneth Farrugia
Chief Executive Officer
Ernest Agius
Chief Operations Officer
Joseph Agius
Chief Technology Officer
Simon Azzopardi
Chief Personal & Wealth Officer
Danielle Grima
Chief Risk Officer
Simon Grech
Chief Commercial Officer
Ivo Camilleri
Chief Strategy, Transformation
& Data Officer
Ray Debattista
Chief People & Culture Officer
Elena Dourou
Group Chief Internal Auditor
(Observer on ExCo)
Theodoros Papadopoulos
Chief Digital Officer
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xvii
Ernest Agius
Chief Operations Officer
Mr Ernest Agius was appointed BOV’s Chief Operations Officer,
in May 2016. He is responsible for the Bank’s Administration
Functions including Corporate Real Estate, Security and Health
and Safety, Procurement, Architect Services and Property
Projects, Investment, Custody Operations and FBR, Continuity,
Outsourcing & ESG, Digital Scanning and archiving, Centralised
Operations including, Cash, Cheque, ATM, Reconciliations and
Safe Deposit Lockers Management, SWIFT & SEPA Payments
Processing and Reconciliations.
Mr Agius joined Bank of Valletta in 2015. With over thirty-
seven years of experience within financial services working
for local and global institutions leading major programmes
across countries and regions. Mr Agius has held several senior
executive positions within the Business, migrating Customers
to digital channels and IT. He has vast experience in Banking
Operations, Core Banking System Implementations, Strategic
Outlook, and Financial Crime Compliance, and has led major
global transformation projects involving complex Technology,
Automation, Human Resources, and de-risking.
Mr Agius has been a member of the Executive Committee since
June 2016, a Member of the Projects Evaluation Committee,
the Internal Control & Risk Management Committee, the ESG
Steerco and the Incident Management Team.
Izabela Banas
Chief Financial Officer
Ms Izabela Banas was appointed as the Bank’s Chief Financial
Officer on 1 March 2021.
She serves as Chair of Asset and Liability Management
Committee and is a Member of the Bank’s Executive Committee
and a number of management committees. Ms Banas is a
permanent attendee at the BOV’s Board of Directors and Audit
Committees as well as MAPFRE Middlesea p.l.c. and MAPFRE
MSV Life p.l.c Audit Committees.
Ms Banas is an experienced Finance professional and has held
a number of senior positions within the Financial Services
industry in the UK and Switzerland. Ms Banas joined Bank of
Valletta after five years with HSBC Group in London where
her last role was as a Chief Financial Officer for Private Bank
EMEA. Having started her career at General Electric Company
as part of Financial Management Programme, she has since
covered wide span of organisations, industries and geographies
including Credit Suisse Group, Willis Insurance Brokers and
Private Equity owned industrial companies in Germany and in
the UK.
Ms Banas holds a Degree in Economics with specialisation in
Finance from University of Illinois at Urbana-Champaign and is
a certified Lean Six Sigma Black Belt.
With effect from the 29 February 2024, Ms Izabela Banas stepped
down from her role at the Bank and accordingly relinquished her
position of Chief Financial Officer.
Joseph Agius
Chief Technology Officer
Mr Joseph Agius was appointed Chief Technology Officer in
October 2014 and became a member of the Bank of Valletta
Executive Committee in October 2016.
Since joining the Bank in 1985, Mr Agius has garnered over thirty-
eight years’ of experience in IT and Financial Services. During
this time, he has been actively involved in the implementation
of various mission-critical projects, including the Core Banking
Transformation programme.
In his role as Chief Technology Officer, he is responsible for
driving the Bank’s IT strategy. He is a strong proponent for the
modernisation of IT infrastructure and applications, on prem or
Cloud, whilst running IT as a business with its inherent business
value. He supports fellow EXCO colleagues in their technology
initiatives.
Mr Agius holds an Honours degree in Computer Science from the
University of Reading and an MBA in eBusiness from Grenoble
Graduate School of Business. He is also a Chartered Engineer and
a member of the British Computer Society.
Mr Agius is a non-executive director on the Malta Information
Technology Agency’s (MITA) Board of Directors and was recently
appointed as Chairperson of the Foundation for IT Accessibility
(FITA) Board.
Simon Azzopardi
Chief Personal & Wealth Officer
Mr Simon Azzopardi has been appointed as Chief Personal and
Wealth Officer on 2 August 2023. He is primarily responsible
for the Branch Network, Investment Centres, Private Banking,
Wealth Management and Digital Channels. Mr Azzopardi
joined Bank of Valletta in 1987 and he has served in various
areas of the Bank including the retail network, corporate
finance, strategic planning, and marketing, and enjoys
considerable experience in investment services. During his
career at BOV, he has occupied various senior positions at
Risk Management, International Corporate Centre, Chairman’s
Office and the various subsidiaries. He was also responsible
for the setting up and running of the Cairo representative
office. Mr Azzopardi became a member of the Bank’s Executive
Committee in January 2021 when he was appointed as Chief
Wealth Management Officer. He is currently a Director of the
BOV Fund Services Board. He is also a Member of various
committees which include, the MMSV Investment Committee,
the MMS Investment Committee and the BOV Funds Services
Risk & Regulatory Committee.
Mr Azzopardi holds a Degree (B.Comm Hons) in Banking &
Finance from the University of Malta, and a MSc International
Securities, Investment and Banking from the University of
Reading. He is also an Associate of the Chartered Insurance
Institute and a Fellow of the London Institute of Banking and
Finance.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xviii
Ray Debattista
Chief People & Culture Officer
Mr Ray Debattista was appointed Chief People and Culture
Officer in October of 2023, after serving in an acting role since
2022.
Mr Debattista joined the Bank in 1984 and throughout his career
occupied various positions within the organisation, spanning
both the retail network and other corporate functions. During
his twenty years in Human Resources, he garnered an in-depth
knowledge of the Bank and its people. His responsibilities
spanned recruitment, employee engagement, performance
management, training, career development, talent management
as well as employee and industrial relations.
Anatoli Grech
Group Chief Compliance Officer
Mr Anatoli Grech holds the position of Group Chief Compliance
Officer. He previously held the position of Head of Strategy and
Regulatory Affairs at BOV Asset Management Limited (BOVAM),
the asset management of the Bank.
Mr Grech is also a Member of the Bank’s Executive Committee,
as well as the Internal Control and Risk Management Committee,
Product Governance and Pricing Committee and Change
Management Committee of BOV.
Mr Grech is a Director on the Board of BOVAM and the Chair of
the Risk and Regulatory Committee of BOVAM and BOV Fund
Services Limited.
Mr Grech is also a Member of the MAPFRE MSV Life plc Risk
and Regulatory Committee. He is also a Member of the Markets
Regulation Committee and Prudential and Supervision Committee
of the European Savings and Retail Banking Group and a Member
of the WSBI-ESBG Task Force on AML.
Elena Dourou
Group Chief Internal Auditor
Elena Dourou joined BOV on 1 October 2020 as Group Chief
Internal Auditor.
Ms Dourou has vast experience in the financial sector and
internal audit and a successful international career. Among
other major institutions, she has worked in Deloitte and
National Bank of Greece in positions relevant to consulting,
internal audit and internal controls and in ABN Amro Bank
(Greece & Italy), Piraeus Bank (Greece), and Ferratum Bank
(Malta) in Executive Internal Audit positions. Before joining
BOV, she was working at the Hellenic Corporation of Assets
and Participations, where she was responsible for monitoring
the internal audit departments of its subsidiaries to ensure
harmonisation of processes and application of Internal Audit
Standards in 15 major Greek Public Sector organisations.
Ms Dourou is a Fellow Certified Chartered Accountant, a
Certified Internal Auditor and a Certified Information Systems
Auditor and holds an MBA from Oxford Brookes University.
Ivo Camilleri
Chief Strategy, Transformation and Data Officer
Mr Ivo Camilleri is a seasoned professional with a career that
spans more than three decades in the domains of banking
business and financial technology. He commenced his tenure
with Bank of Valletta plc in 1987 and has been entrusted with
senior leadership roles in strategically critical sectors for the
past twenty-four years.
Mr Ivo Camilleri has an established record of spearheading
transformative initiatives in the areas of strategy, product
innovation, digital channel development, card and electronic
payment businesses. Mr Camilleri has headed teams that have
led to Bank of Valletta winning awards in the areas of Strategy,
Digital Channels, Mobile Banking and Mobile Payments.
He has also served the Bank in pivotal leadership capacities
across various technical disciplines, including software
application development, technical services, and data-related
technologies. During the second half of 2023, Mr Camilleri was
appointed Chief Strategy, Transformation and Data Office.
Mr Camilleri holds a first-class honours Degree in Information
Technology from the University of Malta.
As an active member of the Bank’s Executive Committee,
Mr Debattista is responsible for developing and executing the
HR strategy in support of the Bank’s overall business plan and
strategic direction. He champions the Bank’s drive to be the
Employer of Choice by focusing on employee journeys and
career paths, whilst driving and implementing initiatives that
enhance the wellbeing of the people. Together with his team at
People & Culture, he is also responsible for succession planning,
talent, and change management, as well as the management
of healthy working relationships with key stakeholder groups
including those representing the Bank’s employees.
Mr Debattista holds a Masters Degree in Business Administration
from Henley Management.
Simon Grech
Chief Commercial Officer
Mr Grech has been employed within the local financial services
industry since 1985, returning to Bank of Valletta in 2015
following a period of experiences outside the Bank. During his
years in the industry, he has served in various areas, primarily
retail banking, corporate and business finance, risk management
and financial crime compliance. Mr Grech has occupied various
senior positions and leading roles in the aforementioned areas
over the past two decades and has also held the position of
president for the local Institute of Financial Services between
2012 and 2015. Since October 2020, Mr Grech has been
heading the Bank’s SME Finance area, supporting small and
medium sized enterprises with their banking and financing
needs, through several specialised offices across Malta and
Gozo.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xix
Danielle Grima
Chief Risk Officer
Ms Grima started her career at the Central Bank of Malta
in 2003 as part of the Financial Stability Department, with
responsibility for data aggregation and analyses of data
received from credit and financial institutions. She joined
Bank of Valletta in 2011 and occupied the role of Head of
the Enterprise Risk Management Unit, responsible for the
oversight of a wide range of risks. She was also Head of the
Supervisory Coordination Unit, responsible for establishing and
maintaining a strong relationship with the JST and managing
and coordinating Bank-wide projects and assignments.
Ms Grima was appointed as Chief Risk Officer in November of
2023, after serving in an acting role since April 2023.
Ms Grima holds a Degree in Bachelor of Commerce (Hons) in
Banking and Finance from the University of Malta.
Theodoros Papadopoulos
Chief Digital Officer
Mr Theodoros Papadopoulos was appointed as Chief Digital
Officer in September 2021 and as a Member of the Bank’s
Executive Committee. Later on, in 2022 he has also been
entrusted to lead the Transformation and Strategy of BOV. He sits
on various other management committees including CMC, PGPC,
and Data Council.
Mr Papadopoulos has extensive experience in redesigning and
implementing digital products in Customer Experience, Voice of
the Customer, Design Thinking, and Customer Journey Mapping.
Prior to joining Bank of Valletta, Mr. Papadopoulos occupied the
role of Global Hotels Projects Team Member with Booking.com
in the Netherlands in 2011 and was eventually appointed as
Manager of Strategic Partnerships in 2013. In 2016, he joined
Eurobank EFG in Athens, Greece where in his position as Director
of User Experience, he helped the bank to increase its digital
footprint in the market.
Mr Papadopoulos holds an MSc in Digital Communications
and Media/Multimedia of Stockholm University, an MSc in
International Business (Public Policy) from Södertörn University in
Sweden, and a BA in Public Relations and Communication Policy.
He is a vastly experienced professional in Digital Transformation,
Digital Banking, Innovation, and Technology and has worked with
Fortune 500 companies, recognised for strong people leadership
and Change Management.
Mr Grech holds a Masters in Business Administration from the
University of Bangor (Wales) and a Bachelor of Science (Hons.)
in Financial Services from the University of Manchester. He is
also a fellow of the London Institute of Banking and Finance as
well as an accredited trainer for the same institute, following
twenty-five years of lecturing experience both locally and
internationally.
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xx
As a socially responsible institution, Bank of Valletta (BOV/the
Bank) seeks to manage its banking activities with integrity and
hold itself accountable to its stakeholders in relation to issues
concerning sustainability, the environment and other ethical
concerns.
Bank of Valletta is committed to supporting the growth and
prosperity of the community in which it operates by making
strategic investments and partnering with local organisations
and charities and undertakes social initiatives. Similarly, BOV
seeks to make a difference in the quality of life through various
initiatives, some of which are described below:
Bank of Valletta’s Corporate Social Responsibility Programme
is BOV’s contribution as an active citizen of the Community in
which it operates. This programme is based on 5 distinct pillars:
• Environmental, Resource and Climate Sustainability,
• Education and Financial Literacy,
• Support to vulnerable members of society,
• Cultural Heritage & Environment Capital of the Maltese
Islands and,
• Ethical and Responsible Behaviour.
Creating awareness about Environment, Social and Governance
(ESG) was central to the Bank’s operations while reducing
its carbon footprint. Branches continued to be upgraded to
reduce the impact on the environment and bicycle use was
also promoted through a collaboration with bicycle advocacy
group ROTA. The Dinja Waħda project in collaboration with
Birdlife Malta focused on increasing the appreciation of the
environment and ways to safeguard it among schoolchildren
through a practical and fun approach.
Corporate Social Responsibility (CSR)
BOV Prize in MedicineCollaboration with bicycle advocacy group ROTA.
The Bank supported major educational awards with the
University of Malta, including the Dean’s List, the Prize in
Medicine and the Foundation for Social Wellness Awards while
continuing to promote literacy from a very young age and
promoting financial education through collaborations with the
Malta Bankers’ Association and Ġemma.
BOV - The Dean’s List
A study on child abuse in collaboration with the University
of Malta yielded valuable information on this sensitive topic.
The state-of-the-art St Michael’s Hospice, that the Bank is
supporting through a collaboration with Hospice Malta is
expected to be inaugurated towards in 2024. The L-Istrina
BOV Piggy Bank Campaign continued to create awareness
about solidarity from a young age and the BOV Volleyball
Marathon raised funds for id-Dar tal-Providenza. The Bank also
extended its support to major philanthropic organisations such
as Caritas (Malta), the Richmond Foundation and the Malta
Trust Foundation among others.
L-Istrina BOV Piggy Bank Campaign
BOV Volleyball Marathon in aid of id-Dar tal-Providenza
Bank of Valletta p.l.c.
Annual Report 2023
Board of Directors &
Group Company Secretary
Chairman’s Statement CEO’s Commentary
Executive Committee &
Group Chief Internal Auditor
Corporate Social
Responsibility
xxi
Restoration project of the Gran Salon
Kalkara Crucifix
Hamrun win the BOV Super Cup
The Bank extended its support to gifted children in the artistic
and academical spheres through collaborations with the
BOV Joseph Calleja Foundation and the Julian’s Pathfinder
Foundation.
Collaboration with the Julian’s Pathfinder Foundation
The long term support of the restoration project of the Gran
Salon yielded part of the original decorations dating back to
the 17th Century. A number of restoration projects, including
an 18th Century Crucifix, and various restoration projects
underway. The Bank continued to support the major Heritage
Trusts in Malta, such as Fondazzjoni Wirt Artna, Fondazzjoni
Patrimonju Malti and Din l-Art Ħelwa.
The Bank collaborated with the Manoel Theatre and the Teatru
Astra and Teatru Aurora in Gozo in the production of 3 high
calibre operas, while introducing youths to theatre productions
through the support of TOI TOI.
The Bank continued to retain its position as the major supporter
of sporting initiatives in Malta stemming from the belief of the
positive physical and mental benefits of sports, both for the
direct and also indirect participants. Besides the major sporting
organisations that are now synonymous with the Bank, such as
the Malta Football Association, the Aquatic Sports Association
of Malta and the Malta Basketball Association, the Bank struck
a number of new collaborations that include Bowling, Netball,
Handball.
BOV Bowling Premier Champions
Directors’ Report as at 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
1
The Directors present their 50th Annual Report, together with the audited financial statements of the Bank of Valletta Group (the
Group) and the Bank for the Financial Year (FY) ended 31 December 2023.
Principal Activities
The Bank of Valletta Group comprises Bank of Valletta p.l.c. (the Bank) and two subsidiary companies namely BOV Asset Management
Limited (BOV AM) and BOV Fund Services Limited (BOV FS). The Group also has two equity-accounted investee companies, MAPFRE
Middlesea p.l.c. and MAPFRE MSV Life p.l.c. The Group’s principal activities are set out below.
The Group offers banking, financial and investment services and connected activities within the domestic Maltese market. The
principal activities of the Bank comprise the following:
1. The receipt and acceptance of customers’ monies for deposit in current, savings and term accounts which may be denominated
in Euro and other major currencies;
2. The provision of loans and advances to a wide array of customers; and
3. The provision of investment services, covering a comprehensive suite of investment products and services that meet the
customers’ needs throughout their lifecycle, including stockbroking, advisory and discretionary portfolio management services.
The Group also provides a number of other services, including, bancassurance, corporate advisory, fund management, fund
administration, and other services, such as 24-hour internet banking service, issuance of major credit cards, night safe facilities,
automated teller machines, foreign exchange transactions, and outward and inward payment transfers.
The Parent Company
Bank of Valletta p.l.c. is licensed to carry out the business of banking and investment services in terms of the Banking Act, 1994
(Chapter 371, Laws of Malta) and the Investment Services Act, 1994 (Chapter 370, Laws of Malta). The Bank is an enrolled tied
insurance intermediary of MAPFRE MSV Life p.l.c. under the Insurance Distribution Act, (Chapter 487, Laws of Malta).
The Bank offers the entire range of retail banking services as well as the sale of financial products such as units in collective investment
schemes. The Bank also offers investment banking services, including underwriting and management of Initial Public Offerings (IPOs).
The Subsidiaries
BOV AM provides management services for collective investment schemes and portfolio management services for institutional clients.
BOV AM is a fully owned subsidiary of the Bank and has three regulatory functions: Asset Management, Risk Management and
Compliance.
BOV FS is also a fully owned subsidiary of the Bank and is recognised as a fund administrator and licensed as a Company Services
Provider by the Malta Financial Services Authority. BOV FS provides a comprehensive suite of services to fund managers and fund
promoters, as well as a full suite of fund administration, shareholder registry services, regulatory reporting and corporate services.
Equity-Accounted Investees
MAPFRE MSV Life p.l.c. operates as a life assurance company licensed under the Insurance Business Act, 1998 (Chapter 403, Laws
of Malta). MAPFRE Middlesea p.l.c. is engaged in the business of insurance, including group life assurance.
The Bank’s Strategic Plan
During FY2023, the Board of Directors continued to oversee the execution of various strategic initiatives by the Bank’s Executive
Management team in support of the Bank’s 2021-23 strategic program. Throughout the process, the Board ensured that the Bank’s
strategy remained aligned with the Bank’s approved Risk Appetite Framework (RAF).
Over the period under review, the Bank also launched the Bank’s 3-year Strategic Plan for FY 2024-26. The strategic planning process
was guided by the Bank’s risk appetite framework and driven by a top-down and bottom-up approach where various key stakeholders
participated in the process. The upcoming strategy is underpinned by the Bank’s current market leadership position and strength of
the balance sheet, and aims to further improve the client experience, strengthen the core areas of business and enable the Bank to
enter into new ones. The key strategic initiatives are centered around 4 key quadrants namely, Customer, People, Internal Operations
and Governance & Risk Management supported by 3 enablers namely, ESG, Digital and Data.
The Board of Directors and Executive Management will be closely following the execution of its strategic plan and has set the opposite
governance framework to ensure that the Bank experiences growth with a strong focus on the customers where our products and
services are evolved to meet their unique and personalised financial needs.
For more information on the Bank’s Strategic Plan, please refer to the CEO’s Commentary.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
2
Principal Risks and Uncertainties pursuant to Article 177 of the Companies Act, 1995 (Chapter 386, Laws of Malta)
The Directors are aware of the various risks faced by the Group as a result of its involvement in different business lines and operations.
Various measures are in place to ensure that such risks and uncertainties are maintained at acceptable levels and are in line with
the Group’s risk appetite and strategy of sustainable, long-term growth and profitability. In line with Bank policy, the Risk Appetite
Framework (RAF) was reviewed and approved by the Board of Directors in December 2022; the BOV RAF Policy was also revised.
The aforementioned RAF was used to monitor and report on a monthly basis, the risk level on different material risk types during the
year ended 31 December 2023, also triggering timely and decisive corrective action where risk levels surpassed defined thresholds.
The RAF was again reviewed in December 2023. Such a revised iteration will be used in the FY2024. The document lays out the
responsibilities of various stakeholders, including the Board of Directors and Senior Management, and establishes various qualitative
and quantitative parameters for acceptable risk-taking categorized by different risk types.
In line with the provisions of the Risk Appetite Statement and Framework, Senior Management is responsible for the day-to-day
monitoring and control of risk-taking, subject to the regular oversight of the Board of Directors through the Risk Committee. The
overall structure is aimed at ensuring a sound risk culture supported by a performance management system that discourages excessive
risk taking.
The key risks faced by the Group include the following risks: credit, market, liquidity, operational, environmental, social, and governance
(ESG). These, and other risks and uncertainties inherent in the business, require sound capital management to ensure adequacy
against regulatory requirements and adverse events. With this in mind, the Group regularly sets out and reviews capital targets in
line with actual and forecasted business levels and monitors performance against such targets on a regular basis. A more detailed
explanation of key risks and capital management is included within the Pillar 3 Disclosures Report available on the Bank’s website, as
well as Note 39 to the Financial Statements.
The Directors also recognise the fact that the Group may be subject to reputation and litigation risk as a result of its actions and
operations. Conscious of the serious repercussions such risks may have on the Group’s and the various stakeholders’ well-being, both
the Board of Directors and Senior Management exercise zero tolerance to conduct risk and aim to instil the highest levels of ethical
behaviour through various policies, procedures, and controls.
Operational Overview
A review of the business of the Group for the year ended 31 December 2023 and an indication of future developments are provided
in the Chairman’s Statement and the CEO’s Commentary, which can be found in the front section of this Annual Report.
Dividends
The Board believes it should continue to balance the Bank’s long-term sustainability and shareholders’ dividend expectations. In this
respect, an interim cash dividend of €0.0462 gross per share amounting to €27.0 million (net ordinary dividend of €0.0300 per share
amounting to €17.5million) was paid on the 6 December 2023 to all members that appeared on the Bank’s Register of Members, as
maintained at the Central Securities Depository at the Malta Stock Exchange, at the close of business of Tuesday 21 November 2023.
On the strength of the financial performance being registered, the Directors propose a final cash dividend of gross €0.0700 per share
amounting to €40.9 million (net dividend of €0.0455 per share amounting to €26.6 million) to be paid to shareholders. This dividend
is subject to regulatory approval and to the approval of shareholders at the AGM.
This dividend is being recommended after taking into consideration the Bank’s future capital requirements, underpinned by a fully
articulated dividend policy which seeks to balance out dividends payout with future growth of the Bank’s equity base. The total
dividend is analysed as follows:
Total Dividend for FY2023
Gross € 67,843,285
Tax at source € 23,745,149
Net € 44,098,136
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
3
Board of Directors
The following Directors served on the Board during FY2023:
Gordon Cordina (Chairman)
Alfred Lupi (resigned on 25 May 2023)
Alfred Mifsud (resigned on 27 April 2023)
Anatoli Grech (appointed on 1 August 2023)
Anita Mangion
Antonio Piras (resigned on 25 May 2023)
Deborah Schembri
Diane Bugeja
Elizabeth Camilleri
Godfrey Swain
James Grech
Kenneth Farrugia
Kevin J Borg
Miguel Borg (resigned on 5 April 2023)
Nicola Angeli (appointed on 1 August 2023)*
Robert Suban (appointed on 25 May 2023)
*Nicola Angeli was appointed Director on the Bank of Valletta Board during the Annual General Meeting held on the 25 May 2023. His
appointment was subject to regulatory approval, which approval was received on the 1 August 2023.
Directors’ Responsibilities
The Directors are required by the Companies Act, 1995 (Chapter 386, Laws of Malta) to prepare financial statements in accordance
with International Financial Reporting Standards (IFRS) as adopted by the EU which give a true and fair view of the state of affairs of
the Group and the Bank as at the end of the financial year and of the profit or loss of the Group and the Bank for the year then ended.
In preparing the financial statements, the Directors should:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group and the Bank will
continue in business as a going concern.
The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time
the financial position of the Group and the Bank, and which enable the Directors to ensure that the financial statements comply with
the Banking Act, 1994 (Chapter 371, Laws of Malta), Companies Act, 1995 (Chapter 386, Laws of Malta) and with the requirements
of Article 4 of the Regulation on the application of IFRS as adopted by the EU. This responsibility includes designing, implementing
and maintaining such internal controls as the Directors determine necessary to enable the preparation of financial statements that
are free from material misstatements, whether due to fraud or error. The Directors are also responsible for safeguarding the assets
of the Group and the Bank, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
After reviewing the Group’s plans for the coming financial years, the Directors are satisfied that at the time of approving these financial
statements, it is appropriate to continue adopting the going concern basis in preparing these financial statements.
Auditors
A resolution to re-appoint KPMG as statutory auditors of the Bank will be proposed at the forthcoming Annual General Meeting
(AGM). KPMG have expressed their willingness to remain in office.
Going concern – Capital Markets Rules 5.62
The financial statements are prepared on a going concern basis. The Directors regard that pursuant to Capital Markets Rule 5.62, this
is appropriate, after due consideration of the Bank’s profitability, liquidity, the statement of financial position, capital adequacy and
solvency. Specifically, the Directors have prepared financial and capital plans for the next three years which show that the Bank is in
a position to continue operating as a going concern for the foreseeable future, which is at least but is not limited to, twelve months
from the end of the reporting period. These plans take into account risks arising in its ordinary course of business including complaints
or legal proceedings by third parties, operational and compliance risks in relation to but not limited to compliance with legislation and
regulations.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
4
Information Pursuant to Capital Markets Rule 5.64
1. Authorised Share Capital
The Bank has an authorised share capital of €1,000 million divided into 1,000 million ordinary shares with a nominal value of €1.00
each.
2. Issued Share Capital
The issued shares of the Bank consist of one class of ordinary shares with equal voting rights attached. The Bank has an issued and
fully paid-up share capital of €583,849,270 divided into 583,849,270 shares with a nominal value of €1.00 each. There were no
changes to the issued share capital during FY2023.
3. Shareholding Structure
Clause 4.3 of the Bank’s Memorandum of Association provides that, with the exception of existing large shareholders, presently the
Government of Malta and UniCredit S.p.A., no person may at any time, whether directly or indirectly and in any manner whatsoever,
acquire such number of shares in the Bank, as would in aggregate be in excess of 5% of the issued share capital of the Bank.
As at 31 December 2023, Malta Government Investments Limited had a shareholding in the Bank of 0.48% and National Development
and Social Fund (NDSF) had a shareholding in the Bank of 2.88%. Both entities are fully owned by the Government.
Any shareholder holding in excess of 50% of the issued share capital of the Bank or if no such shareholder exists, the shareholder
holding the highest number of shares not being less than 25% of the issued share capital, may appoint the Chairman. Qualifying
Shareholders with 10% or more of the shares in issue are entitled to recommend one Director for every 10% holding.
The Directors confirm that as at 31 December 2023, shareholding in excess of 5% of the issued share capital of the Bank was held
directly by:
Government of Malta: 25.0%
UniCredit S.p.A.: 10.2%
4. Appointment of Directors
The rules governing the appointment and replacement of the Bank’s Directors are contained in Articles 24 to 31 of the Bank’s
Articles of Association. More details on the appointment and rotation process of Directors is found under the Corporate Governance
Statement of Compliance, under Principle 3.
An extraordinary resolution approved by the shareholders in the general meeting is required to amend the Memorandum and Articles
of Association.
5. Powers of Directors
The Board of Directors has the power to transact all business of whatever nature, not expressly reserved by the Memorandum and
Articles of Association of the Bank, to be exercised by the Bank in general meeting or by any provisions contained in any applicable
laws.
The shareholders in the general meeting authorised the Board to exercise during the Prescribed Period, all the powers of the Bank
to issue and allot shares up to an aggregate nominal amount equal to the Prescribed Amount. The Prescribed Period refers to a term
of five (5) years approved during an Annual General Meeting held on 2 June 2022 and which term expires on the 1 June 2027. This
authority is renewable for further periods of five (5) years each.
6. Directors’ Service Contracts
The Directors have service contracts with the Bank. More information on the Directors’ service contracts can be found under the
Remuneration Report.
7. Collective Agreements
The relative Collective Agreements regulate the compensation payable to employees in case of resignation, redundancy or termination
of employment for other reasons. More information relating to Collective Agreements is found further below under the section
entitled Non-Financial Disclosures.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
5
8. Employee Share Scheme
The Bank has a Variable Remuneration Share Plan, through which the Board of Directors is authorised to:
i. establish the Plan and to do all such acts and things as may be necessary or expedient to give effect to the Plan; and
ii. issue up to and including 14,596,232 shares from the authorised share capital of the Bank for the purpose of satisfying the
obligations of the Bank that will ensue from the operation of the Plan, without first offering the same to shareholders in proportion
to their then existing holdings.
During FY2023 no shares were issued from the authorised share capital of the Bank for the purpose of satisfying the obligations of
the Bank pursuant to the Plan.
Information pursuant to Capital Markets Rules 5.64.7 and 5.64.10
It is hereby declared that as at 31 December 2023, information required under Capital Markets Rules 5.64.7 and 5.64.10 was not
applicable to the Bank.
Information pursuant to Capital Markets Rule 5.70.1
There were no material contracts to which the Bank, or any one of its subsidiaries, was a party to and in which anyone of the Bank’s
Directors was directly or indirectly interested.
Declaration pursuant to the following Investment Services Rules for Investment Services Providers:
• Part BI: Rules applicable to Investment Services Licence Holders which qualify as MiFID firms (R1-2.2.3)
• Part BIV: Standard Licence Conditions applicable to Investment Services Licence Holders which qualify as Depositories (2.30)
Pursuant to the captioned Malta Financial Services Authority (MFSA) Investment Services Rules, it is hereby declared that during the
reporting period, there were no breaches of the MFSA Investment Services Rules, Standard Licence Conditions or other regulatory
requirements which were subject to an administrative penalty or other regulatory sanction.
Whistleblowing
The Bank has in place a Whistleblowing Policy aimed to encourage reporting of improper practices and suspected wrongdoing in
a controlled manner which safeguards the confidentiality of the whistleblower. The nature of the disclosures made through the
Whistleblowing process are reported to the Audit Committee.
Information pursuant to the Sixth Schedule of the Companies Act, 1995 (Chapter 386, Laws of Malta)
Branches, Agencies and Centres
The Bank has the following Branches, Agencies and Centres around Malta and Gozo:
• 29 Branches offering both deposit taking and lending services;
• 4 Agencies offering deposit services only;
• 1 Sub-Agency/Satellite Branch;
• 1 Corporate Finance Centre;
• 5 Business Centres;
• 1 Wealth Management Centre; and
• 5 Investment Centres.
Research and Development
In light of the business sector in which it operates, the Bank does not consider research and development as a main area of activity.
Events occurring after the end of the accounting period
There were no events occurring after the end of the accounting period which warrant reporting in this Annual Report.
Related Party Transactions
No significant related party transactions occurred during FY2023.
A more detailed explanation on Related Party Transactions is included in Note 37 to the Financial Statements.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
6
Non-Financial Disclosures
The following disclosures are made pursuant to Directive 2014/95/EU:
1. Business Model
Bank of Valletta operates a robust and diversified business model, driven by various lines of businesses servicing both personal and
business client segments. The Bank’s business functions are organised across two key pillars, Personal & Wealth and Commercial
Banking. Through these pillars, the Bank provides its diverse client base with a comprehensive suite of banking and financial services
solutions.
The Bank’s Personal and Wealth Management business line, services the requirements of our personal and micro business clients,
through a service channel that includes a strong branch network in Malta and Gozo, specialised Investment Centres and a Customer
Service Call Centre. The Bank also supports its customers through a fleet of ATMs and online and mobile banking platforms. Our
Personal Banking team members across our service touchpoints provide our personal and microbusiness clients with a comprehensive
suite of banking and financial planning solutions aiming to support the achievement of their short and long-term goals. The product
catalogue includes investment, bancassurance, brokerage as well as personal, homeownership and micro-business lending products.
The team responsible for our Commercial Banking business, provides our small, mid, and large corporate clients operating in Malta
and Gozo, with our industry-leading thought leadership insights, as well as a suite of commercial banking and financial products and
services including credit financing, foreign exchange, trade finance and other general commercial services. Large corporates are
serviced through our specialised Corporate Centre, with small to mid-sized enterprises serviced through several Business Centres
located across Malta and Gozo.
Our front-line colleagues across our personal and commercial client touchpoints, together with the assistance of our support
and control functions, invariably strive to apply a client-centric approach in everything that they do to ensure, that the Bank fully
understands the needs of its clients and delivers added value through our product and service propositions.
Our People remain the foundation of the Bank’s success and we fully embrace the importance of cultivating a high performance,
diverse and inclusive culture. We are focused to further empower our employees so we can better service our esteemed clients,
develop our technological infrastructure, manage the various risks faced by the Bank and drive our program of innovation forward.
In the process, we seek to recruit high quality talented people and provide employees with a diverse suite of training opportunities
through our BOV Academy as well as external training opportunities. As we strive to be the Employer of Choice, our People Strategy
is driven by the provision of clear career progression paths, personal development and wellness programs, as well as competitive
compensation packages aiming to reward the people who consistently support and deliver commercial success.
As Malta’s largest Bank, we strongly recognise the importance of responsible growth and have initiated the process to embed ESG in
our business and operational model. We are also committed to support our clients with Environmental, Social and Governance (ESG)
requirements and the transition to a low carbon economy. In the process, we have strengthened our governance framework and
resources to ensure we have the required skills and expertise on ESG issues that will impact both the Bank and our clients. Additionally,
our Corporate Social Responsibility Program has enabled us to invest in the wellbeing of the society we operate in through a focused
program of initiatives covering amongst others Malta’s heritage, arts, culture, sports and various not-for-profit organisations.
Looking ahead, we will continue to leverage the strength of the Bank to remain a relevant and dependable partner to our clients,
aiming in the process to meet their expectations as well as those of other important stakeholders such as our People, Shareholders
and Regulators.
2. Environmentally Friendly Measures – Environmental Social Governance (ESG) Risk Management and Disclosures
The Non-Financial Disclosure relating to Environmental, Social and Governance is found in the ESG Risk Management Disclosures
section on page 43 of this Annual Report.
3. Social Matters
a. Trade Unions
The Trade Union element within the BOV Group is still strong with a substantial number of the employees within the Bank being
members of a trade union. The two (2) main trade unions within the Bank are Malta Union of Bank Employees (MUBE) and General
Workers Union (GWU). The GWU is currently the recognised union with which the Bank negotiates its Collective Agreement. The
Bank’s relationship with both unions is very good and is characterised by unilateral communication and healthy discussions. In fact,
the Bank has not experienced industrial actions of any form in years.
b. Community Programme
Bank of Valletta’s social responsibility towards the community in which we operate refers to our commitment to creating social or
environmental good without focusing on profit. We manage our banking activities with integrity and support numerous organisations
that play a tangible role within this same community.
We have restructured our extensive Community Programme to support five (5) main areas namely Environmental, Resource and
Climate Sustainability, Education and Financial Literacy, Support to vulnerable members of society, Cultural Heritage & Environment
Capital of the Maltese Islands and Ethical and Responsible Behaviour.
The Bank’s Corporate Social Responsibility is described in further detail under Principle 12 within the Corporate Governance Statement
of Compliance within this Annual Report.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
7
STAFF COMPLEMENT BREAKDOWN
WORKFORCE
DISTRIBUTION
BY GENDER
FEMALES
1383
MALES
906
WORKFORCE
DISTRIBUTION BY
EMPLOYMENT
TYPE
TEMPORARY
108
PERMANENT
827
PERMANENT
1275
TEMPORARY
79
WORKFORCE
DISTRIBUTION
BY GRADE
OTHER GRADE
859
MANAGEMENT
438
MANAGEMENT
524
OTHER GRADE
468
c. Relationship Management
As the largest financial institution in the country, we want to sustain our market position as the bank of choice, serving customer needs
across a variety of segments and providing bespoke services to the medium and high end of the personal and business segments.
Building on the sound infrastructure delivered through the current strategy, our new strategy will continue to focus on delivering
a customer experience that is aligned with evolving expectations. We will significantly increase our investments in digital platforms,
financial advice and innovative lending instruments. The Bank’s strategy will continue to be heavily conditioned by our sound ESG
principles with the ultimate goal to assist our customers and society in achieving a more sustainable future.
We continue to experience a material shift of customer preferences towards our mobile and internet banking channels. As we strive
to improve our offering in the digital space, supported by the largest bank operated ATM network, Bank of Valletta will continue to
operate the largest branch network across the island through refurbished branches and increasingly personalised services, assisting
clients as they progress through the various stages in life.
4. Employee Matters
As at end of December 2023, the total employee headcount stood at 2,289. The organisation has experienced modest growth in its
workforce compared to the previous year, coupled with a decreasing nine percent (9%) turnover rate.
The gender distribution of the organisation stands at a stable 60/40 female-male ratio. Additionally, there is a fifty-four percent (54%)
female representation within the management level (category 4 and above).
In terms of the demographic structure, 2.4% of employees hail from over twenty-six (26) different countries.
Number of Head Count
Permanent Temporary
By Role Female Male Female Male
Employees in Management 518 423 6 15
Rest of Workforce 696 389 102 64
Employees on Special Leave 61 15
By Nationality Female Male Female Male
Foreign 25 31 1 7
Maltese 1250 796 107 72
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
8
The Bank uses various tools for screening new employees as part of its due diligence process, including Police Conduct, Safe Watch
and Credit Info screening, reference letters and others, whilst remaining within the ambit of the General Data Protection Regulation
(GDPR) requirements. The due diligence process with respect to recruitment and resourcing is laid down in the Bank’s Resourcing
Policy.
During the course of employment, employees are also expected to abide with other policies and guidelines, primarily the Code of
Conduct and Ethics, the Conflict of Interest Policy, as well as other, role specific policies to ensure that staff members abide with
regulatory requirements. Compliance is ensured through regular internal and external audits and audit trails. Non-compliance and
breaches of the above, as well as other policies, may lead to sanctions as contemplated in the Discipline section of the Collective
Agreement.
The ratio of the average basic remuneration, by gender is €40,014 for the Male Workforce and €34,986 for the Female Workforce.
The reason for this variance is due to the difference in tenure, with that of Males being higher than Females (on average 2.5 years).
The ratio of the average basic remuneration by gender was worked out as a sum of female (or male) salary per capita/sum of all salaries
per capita.
The Bank is covered by two (2) Collective Agreements which bind the relationship between the organisation and its employees. The
last Collective Agreement negotiated by the Bank with the recognised union for the clerical & managerial categories was signed on
the 23 March 2022 for the period 1 January 2022 to the 31 December 2024. The percentage of employees under this collective
agreement is ninety-two percent (92%). The employees under collective agreement for the clerical & managerial categories include
all employees from Category 1 up to Category 4 less those working on part-time basis and definite contract. The other Collective
Agreement for support employees was signed on the 30 November 2022.
The Collective Agreements include several Family Friendly measures ensuring employee matters are taken care of, including but
not limited to Reduced Hours Work Arrangements, Adoption/Fostering Leave, Bereavement Leave, Community Work Leave, Health
Insurance, Employee Welfare, Employee Wellness Allowance and Childcare & Summer School Subsidies.
During the previous year, BOV launched its first Voluntary Occupation Pension Scheme (VOPS). All fulltime employees are eligible
to enroll in this scheme, which provides for direct contributions by the Bank into the employee’s personal pension pot. Under this
workplace pension (Pillar 2), the Bank is effectively committed to match every employee’s contribution up to a maximum of €2,400
per calendar year, starting from 2022. This commitment is guaranteed for at least five (5) years. As at December 2023, take-up was
to the tune of 855 employees.
The last Collective Agreement restructured the salary grid and levels within the Bank, removed additional layers which were inhibiting
career or salary progression whilst facilitated enhanced lines of communication and colleague empowerment. The Bank moved from
an eight (8) Salary Level Grid to four (4) Categories resulting in a salary structure that has been broadened significantly. As a result,
high performing employees will be able to progress their salary ahead of promotion opportunities. This will enable the Bank to be in a
better position to reflect market salary levels for more specialised roles needed for the future.
Several other initiatives were continued from the previous year with the specific intent of supporting employees’ wellbeing. These
include incentives for employees who are members of a voluntary NGO and for those who carry out at least eighty percent (80%) of
their work commute either walking, cycling, using public transport, electric vehicles, or carpooling. These benefits are consistent with
the Bank’s desire to support our colleagues, the community, and the environment as part of its wider ESG commitment. The Bank
has a number of initiatives both in place and in the pipeline for FY2024 with the specific intent of supporting employees’ wellbeing
and engagement. These include the bi-annual employee engagement surveys that help identify areas of disengagement and provide
engagement best practice tips and assistance to management where required. It also provides information the Bank uses to address
areas for improvement such as career progression. In FY2024 the Bank shall have a Wellness Policy in place and a more holistic
Corporate Wellness Programme which will incorporate all the benefits the Bank currently offers as well as other further benefits that
are currently being negotiated.
The following table depicts the number of employees entitled to parental leave, the number of employees who have taken up the
family friendly measure, the latter also being compared to the total labour hours. Parental leave taken is 2.54% of total labour hours.
Male Female Total
Total Parental Leave hours 1,112.5 95,400 96,512.5
Total Labour Hours 1,591,128 2,211,754 3,802,882
0.07% 4.31% 2.54%
The Bank also has in place several policies ensuring respect for human rights including a Bullying Policy, a Sexual Harassment Policy,
a Code of Conduct & Ethics, an Employee Grievance Policy and an Equality Policy. The latter is to be enhanced into an Equality,
Diversity and Inclusion Policy.
In 2023, the Bank has been re-certified with the Equality Mark by the National Commission for the Promotion of Equality (NCPE), a
reward that was first received in 2011. The Equality Mark recognises the Bank’s efforts to provide a healthy work environment that is
free from any type of discrimination. It also acknowledges the Bank’s responsibility to provide equal access to opportunities and career
development based on employees’ skills, irrespective of their gender and caring responsibilities.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
9
Indeed, Bank of Valletta employs over the requested quota for employees with different abilities. The different ability employment
percentage at BOV is 2.17%.
Moreover, the Bank has an Employee Assistance Programme that assists employees in resolving personal or work-related problems
that may impact on their ability to carry out their work-duties. The Bank, in conjunction with the Richmond Foundation, also offers its
staff members free Mental Health Care related services on a confidential basis.
Meanwhile, as part of its people strategy, the Bank gives significant importance to Human Rights matters in various ways, as follows:
Grievances
The Bank is highly committed in ensuring that all employees are given the opportunity to voice their personal and/or collective
grievance without any fear, hesitation, or doubt that this will have a negative impact on their employment and career. To this effect,
the Bank has a grievance policy in place to regulate and facilitate the process of addressing grievances. This involves the setup of an
independent board, which is well versed in the Bank’s Collective Agreement. The Board listens to and evaluates grievances received,
before taking a decision on the remedy to the case. During FY2023, the Bank did not register any official claim under the Grievance
Policy.
Ad Hoc Boards
In those instances where People & Culture is notified of any situation/s, either by employees or third parties, which might be adversely
affected by one or more aspects of the Bank’s daily operations, People & Culture may also appoint an ad-hoc independent board to
investigate the matter and its veracity and propose a suitable action and way forward. There were no such instances in FY2023.
Discipline
The Bank requires all its employees to comply with its Code of Conduct and Ethics as well as with the proper standards of performance
and behaviour. These are intended to maintain the highest level of integrity both inside and outside the Bank. In the case of breaches
of these standards, the Bank takes the appropriate disciplinary action regulated by its Discipline Policy. During FY2023, there were
thirty-eight (38) cases that merited disciplinary action. These were all addressed in line with the Discipline Policy.
Bullying Policy
The Bank considers any unwelcomed physical, verbal or non-verbal behaviour which denigrates, ridicules, or intimidates individuals,
as unacceptable. Through this policy, the Bank wants to ensure that its employees are treated with respect and dignity, and that their
rights are safeguarded at all times. Moreover, the objective of this policy is to raise organisation-wide awareness on the impact of
bullying on fellow colleagues as well as the implications and consequences of such inappropriate behaviour. There were no reported
cases of bullying in FY2023.
Sexual Harassment Policy
The Bank is committed to providing a professional work environment for every individual that comes into contact with the organisation.
The Bank does not tolerate, condone or allow sexual harassment (verbal or physical) whether engaged in by fellow employees,
management, associates and partners or by outside clients or other non-employees who conduct business with the Bank. The Policy
also acknowledges that the victim of sexual harassment may experience emotional stress, physical stress and/or a negative change
in job performance. Therefore, necessary support through the Staff and Organisation Support Programme would be made available.
There were no reported cases of sexual harassment in FY2023.
Performance Management Process
The performance management framework of the Bank serves as the cornerstone of our Organisation’s success. It is designed to align
individual and team objectives with corporate and strategic objectives. This comprehensive process ensures that every employee’s
contribution is recognised and valued.
At its core, the process commences with clear objective setting through thorough collaboration and open communication. Objectives
are established via a top-down approach, creating a roadmap that connects individual efforts to broader organisational targets. The
performance management process fosters a culture of open communication between employees and management alike, through
one-to-one meetings and continuous feedback. These feedback sessions ensure that employees stay on track, address areas for
improvement and provide a space for continuous development.
Consistency and fairness are two (2) important elements in performance management which enhance employee engagement. The
calibration exercise, which was carried out in December 2023, ascertains that this aim is reached. This is closely followed by end-of-
year reviews which completion date is end March 2024. During this phase of the process, recognising employee performance takes
centre-stage, as also outlined in the performance reward framework. Employees are rewarded for their output and behaviour, two (2)
components which add up as the final rating.
In December 2023, employees were encouraged to complete a self-appraisal, an opportunity to evaluate their performance, identify
their strengths and highlight their achievements vis-à-vis the objectives assigned to them at start-of-year.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
10
Percentage of Employees Eligible for the Performance Management Programme in 2023 organised by Category:
Category Female Male
5 38% 62%
4 60% 40%
3 67% 33%
2 62% 38%
1 44% 56%
The table above displays the percentage female-to-male ratios for employees that are eligible under the Group’s performance
management programme for FY2023. The information presents aggregates for both definite and indefinite employment contracts
organised by category.
There was a total of 2029 employees who participated in the Achieve performance framework, this being equivalent to 88.6% of
the total workforce.
Diversity, Equality, and Inclusion
The Diversity, Equality, and Inclusion (DEI) Committee features a core team that is working together to promote a healthy environment,
ensuring that employees have equal opportunities regardless of age, race, cultural background, skills, beliefs and sexual orientation.
Its mission is to foster a diverse, equitable, and inclusive environment where every employee feels valued, respected, and empowered
to thrive. We are committed to creating a culture that embraces and celebrates the unique perspectives, backgrounds, and identities
of our employees. Through collaborative efforts and proactive initiatives, we strive to eliminate systemic barriers, promote equal
opportunities, and cultivate a sense of belonging for all.
To start breaking the stigma, the Bank’s DEI Committee invited employees to start talking about mental health and to support
one another. Every employee also received a pin to wear during the month of October, to help raise awareness. Sessions about
Mindfulness and Self Care and Gratitude that involved acceptance were also organised, meaning that attention needs to be paid to
thoughts and feelings without judgement.
In a bid to take its mission forward, and ensure as broad a representation as possible, the Committee opened an internal call for
anyone interested in serving on one of its sub-committees with the theme “Let’s work together toward a more Diverse and Inclusive
Bank”. These are:
Racial and Ethnic Diversity
This team will focus on initiatives that promote equality, understanding, and respect
for people of different races
Domestic Violence Initiatives will focus on raising awareness and educating on domestic violence
LGBTQ+ Inclusion
Initiatives will focus on ensuring the inclusion of individual employees across all the
gender spectrum
Age Inclusion
This team will address differences across age brackets, and show the value
of individuals across different age groups, challenging ageism and promoting
intergenerational collaboration
Disability and Neurodiversity Inclusion
Here, the team will be focusing on recognising people with different skill sets and
abilities, ensuring there is a broader understanding of their challenges and that they
are fully integrated into the BOV family
Indeed, during Pride Week, we celebrated the achievements of the LGBTIQ+ community within our society and continued to raise
awareness about inclusion at the place of work. Members of the DEI - LGBTIQ+ Sub-Committee shared their experiences as members
of the LGBTIQ+ Community wherein participants had the opportunity to discuss and ask questions.
As we move forward, we will continue to champion similar initiatives, recognising that our collective strength lies in our differences.
5. Anti-Corruption and Bribery Matters
Bank of Valletta is committed to high standards of ethical behaviour and has zero tolerance towards bribery and corruption. A
dedicated Anti-Bribery and Corruption Function is set up within the AFC Department to support the business and stakeholders, the
economy, and society, in general, to mitigate bribery and corruption risks through the Groups’ Anti-Bribery and Corruption Policy and
Procedures.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
11
The Bank requires that all employees, including the Board of Directors and third-party providers, comply with the principles in the
policy, in the performance of their duties for or on behalf of the Bank. The policy requires all Bank entities and individuals to apply
controls to protect itself against bribery and corruption risks, particularly within activities such as the receiving and offering of gifts
and hospitality, hiring, third-party management, speaker events, sponsorships, donations, charitable giving, joint ventures, mergers,
and acquisitions. Specific procedures, systems, and controls to manage bribery and corruption risks covering these activities have
been outlined within the Bank’s procedures. Monthly controls are in place to review the position and escalate any issues as part of
the governance committees’ reporting.
During 2023, the Anti-Bribery and Corruption function worked closely with various business units to implement and enhance
user experience and group-wide systems which are in line with international standards. Groundwork has also been initiated to the
attainment of the international standard certification i.e. ISO 37001, Anti Bribery Management Controls. Further enhancements were
implemented to the Group-wide Gifts and Hospitality register, hiring controls, and the third-party risk management framework in
collaboration with the business.
Focus on specific role training was delivered on main activities such as hiring, third party risks, and gifts and hospitality, to employees
who by the nature of their role, are exposed to heightened risks of bribery and corruption, such as Business Owners, Branch Managers,
Risk Correspondents, employees managing recruitment and employees within Corporate and Social Responsibility.
6. Identification and Management of Principal Risks
In conducting its day-to-day business activities, the Bank is exposed to different risk types. The sound management and control of
such risks is important to ensure that the relative probability of risk event materialisation is minimised to the greatest extent possible
in the interest of institutional stakeholders.
Risk management and control is practiced under the following configuration:
i. Top-level corporate governance
Board of Directors, various Board Committees such as the Risk Committee, the Executive Committee, and other management
committees such as the Asset and Liability Management Committee (ALCO) and Internal Control and Risk Management Committee
(ICRMC).
ii. First line
With respect to revenue-generating business units, such have ingrained frontline risk management internal control measures, with
dedicated risk correspondents appointed to facilitate the implementation of the operational risk policies and the embedment of the
Bank’s risk culture across the network.
iii. Second line
This comprises various second-tier risk control and oversight functions such as Financial Risk Management, Risk Coordination and
Quality, Environmental Social and Governance, Credit Risk Management, Operational Risk Management, Compliance, Anti- Financial
Crime, Financial Control, and other back-office support functions (example: quality control).
iv. Third line
Independent assurance and constructive challenge by the Group Internal Audit.
The main risk types are outlined hereunder:
a. Credit Risk:
The risk of loss arising from default or credit quality deterioration of a customer or other counterparty to whom the Bank has either
directly provided credit or in respect of whom it has assumed a contractual obligation.
This risk is managed and controlled in various ways, such as through the regular review of credit policies to reflect the Bank’s Risk
Appetite Framework, credit scoring systems, an internal risk rating system supplemented by an Early Warning System to enable
proactive monitoring, a forward-looking expected credit loss model for quantifying provisions compliant with the IFRS 9 accounting
regime, stress testing relating to credit risk, and various other measures. Regular reporting on asset quality and credit risk is made to
the Risk Committee and the Board of Directors. The Bank’s underwriting processes include a four-eye approach for business credit
facilities and retail facilities of significant magnitude. The Bank has implemented more stringent policies relating to forbearance and
non-performing loans and has included more granular credit risk-related Key Risk Indicators in the Bank’s Risk Appetite Framework,
internal limits relating to single-name and sectoral concentration risk, and various other mitigants. A new credit grading model was
formally validated in December 2022 and has been used across the Bank since early 2023. Key advantages of this model include
enhanced granularity and intuitiveness. Its outputs feed into BOV’s reporting database, ECL model, and underwriting tool. The model
is in the process of being recalibrated in the normal course starting in early 2024 to ensure continued accuracy and effectiveness.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
12
b. Operational Risk:
The Group defines operational risk, in line with the Basel framework, as the risk of loss resulting from inadequate or failed internal
processes, people, systems or from external events. It covers execution errors, fraud, legal, regulatory and conduct risk amongst its
sub-categories.
Operational risk spans across all departments, products and channels of the Group and encompasses the entire value chain, including
outsourcing service providers. For this reason, all employees are responsible for managing and controlling the operational risks
generated by their activities.
The Group’s goal in terms of operational risk management is timely identification, assessment, and mitigation of material operational
risks. This is achieved via the use of core risk management tools such as Risk and Control Self-Assessments that are required to be
undertaken by every functional area of the BOV Group as well as Risk Event management, which allows to record and analyse failures
and losses and derive lessons learned.
The Group’s overall operational risk appetite is low; and this aims to protect the BOV franchise, to support its strategic objectives, and
ensure availability of services to support the local economy. Over the last year, the Bank has taken concrete measures to strengthen
the Operational Risk Management Framework, enhance the core set of policies and implement robust governance arrangements and
senior committees that are tasked to oversee the operational risk portfolio of the Group. Every area of the BOV Group has a dedicated
Risk Correspondent, an essential role to support the embedding of operational risk management across the whole organisation. The
Group continues to invest in its technical and human resources to meet and comply with the increased regulatory expectations and
to ensure that it has solid foundations to facilitate timely, accurate, and meaningful operational risk reporting which is required to
monitor and take remedial action to address existing and emerging risks. A dedicated IT solution fully integrates the core elements of
operational risk thus having one single repository containing an inventory of key risks and controls including the functionality of action
management and risk event management.
c. Market Risk:
Market risk is the risk incurred as a result of changes in market factors such as interest rate, credit spreads, equity prices, and foreign
exchange rates that affect the value of positions mainly in the investment portfolio. A robust and prudent Treasury Management Policy
ensures that responsible and well-informed risk-taking is practiced by the Treasury function in line with the overall direction provided
by ALCO and Risk Committee. Other important processes include the analysis of counterparty credit risk, credit valuation adjustment,
and the development of a methodology to quantify credit spread risk and equity price risk on the part of the investment portfolio
which is reported in the audited accounts at fair value (i.e. on a mark-to-market basis). The Bank has its own Interest Rate Risk in the
Banking Book (IRRBB) model to quantify risk arising under different stressed scenarios as prescribed by applicable regulatory dicta and
which is premised on two (2) approaches: the Economic Value of Equity approach and the Earnings Based approach.
d. Liquidity Risk:
Liquidity risk is the risk that the Group would be unable to meet its obligations when they fall due or can only obtain them at an
unreasonably high cost.
A range of liquidity risk management tools are used to monitor liquidity risk such as maturity ladder gap analysis and the regular
updating of key metrics Including: the Liquidity Coverage Ratio, the Net Stable Funding Ratio, the Loans-to-Deposit Ratio, the Maturity
Transformation Metric and various others. Furthermore, over and above the Internal Liquidity Adequacy Assessment Process (ILAAP)
which is thoroughly reviewed every year, the Bank conducts robust stress testing on liquidity in line with the stress testing programme
which is reviewed and updated on an annual basis. Other important elements within the liquidity risk management toolkit include the
Contingency Funding Plan which is regularly updated and tested by means of simulation exercise and a prudent Liquidity Risk Policy
which is also updated periodically.
e. Solvency Risk:
The Group ensures that it is adequately capitalised to meet all regulatory requirements to achieve its strategic objectives in line with
its risk appetite, and to be able to withstand unforeseen macroeconomic downturns. The Group insists that capital should be managed
in a transparent and consistent manner to ensure the most efficient outcome for shareholders, whilst at the same time be compliant
with all relevant regulatory conditions.
As part of the Internal Capital Adequacy Assessment Process (ICAAP) the Bank monitors the capital position on a regular basis and
updates its Capital Plan to ensure that there is enough capital not only to meet Pillar 1 risks such as credit, operational, and market,
but also other Pillar 2 risks such as IRRBB, concentration risk, equity risk, and others.
Stress testing, which is performed on a quarterly basis, aims to ensure that the Bank’s capital position is able to withstand severe
macroeconomic downturns and/or other adverse events in terms of important capital related ratios, including the Common Equity Tier
1 capital, total Capital Adequacy Ratio and Leverage ratio. This was successfully tested in May 2022 when, following the out-of-court
settlement of the Deiulemar litigation case, the Bank still maintained a strong capital position and continued to exhibit a reasonable
surplus over the Overall Capital Requirements supplemented by Pillar 2 Guidance.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
13
f. Regulatory Compliance Risk
The risk of non-compliance with regulatory obligations as well as supervisory expectations which may result in administrative or
disciplinary sanctions, or of material financial loss, due to failure to comply with the provisions governing the Group’s licensable
activities. By ensuring that these rules are observed, the Group works to protect its customers, shareholders, counterparties, and
employees.
This is conducted in alignment with the Group strategy as operating a business model based on prudence and sound governance, and
to continue strengthening the corporate ethos based on integrity, fairness and transparency.
i. Financial Crime Compliance
The BOV Group is committed to fighting against financial crime and to set up and implement a programme to identify, understand and
mitigate the financial crime risk. The financial crime risk encompasses:
a. money laundering and terrorist financing;
b. breaches of sanctions; and
c. bribery and corruption.
The Bank maintains a thorough anti-financial crime (AFC) risk assessment in order to identify, understand, manage and mitigate
inherent AFC risks. Risk mitigations measures are designed and implemented to control adequately and effectively those inherent
risks. Inherent and residual risks are managed in line with the Bank’s risk appetite.
The Bank continues to invest heavily in a transformation programme and today is able to combat financial crime much more effectively
and sustainably over the long-term.
BOV remains committed to implementing a robust financial crime compliance programme.
ii. Regulatory Compliance
Complying with the regulatory obligations and internal codes is the responsibility of all Group employees who must demonstrate
compliance and integrity in their daily tasks. The Bank operates a Three Lines of Defence 3 (LOD) governance model with the first line
responsible for identifying and managing risk as part of its accountability for achieving objectives.
The Second Line provides the necessary guidance, support, and training to enable compliance risks to be managed by the First Line.
The Third Line of Defence provides independent assurance.
Group Compliance is an independent risk control function headed by the Group Chief Compliance Officer (GCCO) and constitutes
the second line of defence for compliance risk. The GCCO reports to the Chief Executive Officer (CEO) and to the Compliance and
Anti-Financial Crime Committee (CAFCC), which is a Board Committee. The BOV Group’s Data Protection Officer and the Money
Laundering Reporting Officer (MLRO) reported to the Group Chief Compliance Officer during 2023.
g. Key Risk Indicators
The Group has in place a set of key risk indicators (KRI) that are quantifiable measures which ensure that material risks are kept within
defined thresholds as formalised in the Risk Appetite Framework. A selection of key metrics is tabulated hereunder.
Risk Type Metric Reading as at 31.12.2023
Solvency
Common Equity Tier 1 Ratio 22.66%
Capital Adequacy Ratio 25.94%
Liquidity
Liquidity Coverage Ratio 362.18%
Net Stable Funding Ratio 185.03%
Profitability Return on Equity Ratio (post-tax) 14.11%
Various non-financial KRIs enable the Directors also to evaluate the risk profile exhibited on other risks such as reputational, compliance,
anti-financial crime, operational, ESG, and risk culture.
The KRIs are reported on a regular basis in the RAF Dashboard which includes threshold ranges set to facilitate comparison between
progress achieved towards attainment of strategic objectives and the actual risk profile exhibited viz.: ‘Target’, ‘Tolerance’, ‘Limit’, and
‘Capacity’.
Other than as disclosed in Note 43 to the financial statements, there were no subsequent events which would have otherwise
warranted an adjustment to or disclosure in these financial statements.
Directors’ Report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
14
Statement of Responsibility by the Directors pursuant to Capital Markets Rule 5.68
We, the undersigned, declare that to the best of our knowledge, the financial statements prepared in accordance with the applicable
accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Bank and its
subsidiaries included in the consolidation taken as a whole, and that this report includes a fair review of the performance of the
business and the position of the Bank and its subsidiaries included in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
Signed on behalf of the Bank’s Board of Directors on 27 March 2024 by Gordon Cordina (Chairman) and Kenneth Farrugia (Chief Executive
Officer) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Accounts
2023.
Corporate Governance Statement of Compliance
Bank of Valletta p.l.c.
Annual Report 2023
15
A. INTRODUCTION
Pursuant to the Capital Markets Rules, Bank of Valletta p.l.c. (the Bank) as a company whose equity securities are listed on a regulated
market, should endeavour to adopt the Code of Principles of Good Corporate Governance (the Code) contained in Appendix 5.1 to
Chapter 5 of the Capital Markets Rules. In terms of Capital Markets Rule 5.94, the Bank is obliged to prepare a report explaining
how it has complied with the Code. For the purposes of the Capital Markets Rules, the Bank is hereby reporting on the extent of its
adoption of the Code.
The Board of Directors (the Board) is committed to the values of truth, transparency, honesty and integrity in all its actions. The Board
strongly believes that the Bank benefits from having in place more transparent governance structures and from improved relations
with the market which enhance market integrity and confidence. The Board acknowledges that the Code recommends principles for
the Board and the Bank’s management to pursue objectives that are in the interest of the Bank and its shareholders.
Good Corporate Governance is the responsibility of the Board, and in this regard the Board has adopted a corporate decision-making
and supervisory structure that is tailored to suit the requirements of the Bank’s constitutional documents as well as its size, nature and
operational needs. In addition, while the structure provides flexibility and an efficient decentralisation of selective decision-making,
it concurrently provides a system of checks and balances. The Board believes that any structure which is adopted must be geared to
meet the necessary standards of accountability and probity and considers that the structure which it has adopted does so.
As demonstrated by the information set out in this Statement, together with the information contained in the Remuneration Report,
the Bank believes that it has, save as indicated in the section entitled Non-Compliance with the Code, throughout the accounting
period under review, applied the principles and complied with the provisions of the Code. In the Non-Compliance section, the Board
indicates and explains the instances where it has departed from or where it has not applied the Code.
B. COMPLIANCE WITH THE CODE
Principle 1: The Board
The Board’s role and responsibility is to provide the necessary leadership, to set strategy and to exercise good oversight and stewardship.
The Board is composed of two (2) Executive Directors and ten (10) Non-Executive Directors, including the Chairman. This mix of
Executive and Non-Executive Directors on the Board enables the Non-Executive Directors to exercise their monitoring function over
the management and the executive arm of the Board at the level of the Board. Moreover, the fact that the Chief Executive Officer
(CEO) is also an Executive Director on the Board, enables the Board to be in receipt of timely and appropriate information in relation
to the business of the Bank and Management’s performance. As a result, the Board can contribute effectively to the decision-making
process, whilst at the same time exercising prudent and effective controls.
The Board delegates specific responsibilities to a number of Committees, notably the Audit Committee, the Risk Committee, the
Compliance and Anti-Financial Crime Committee, the Nominations and Remuneration Committee and the Environmental, Social and
Governance Committee (ESG Committee), each of which operates under formal Terms of Reference approved by the Board.
Further details in relation to the Committees and the responsibilities of the Board are found under Principles 4 and 5 of this Statement.
Principle 2: Chairman and Chief Executive Officer (CEO)
The Bank’s organisational structure incorporates the position of a CEO. The position of the Chairman and that of the CEO are
occupied by different individuals. Their respective positions have been defined with specific roles rendering these positions separate
from one another. These specific roles are identified within the Board Terms of Reference and in their contract of engagement. This
separation of roles of the Chairman and the CEO avoids concentration of authority and power in one individual.
The Chairman is responsible to lead the Board and to set its agenda. The Chairman ensures that the Board’s discussions on any issue
put before it goes into adequate depth, that the opinions of all the Directors are taken into account and that all the Board’s decisions
are supported by adequate and timely information. The Chairman ensures that the CEO develops a strategy which is agreed to by
the Board.
On the other hand, the CEO, besides being an Executive Director, leads the Bank’s Executive Committee, which is the highest
executive decision-making body within the Bank.
More information on the Bank’s Executive Committee can be found under the section entitled Executive Committees, within this
Statement.
Principle 3: Composition of the Board
The Board considers that during the year under review the size of the Board, whilst not being too large as to be unwieldy, was
appropriate, taking into account the size of the Bank and its operations. The combined and varied knowledge, experience and skills
of the Board members provided a balance of competencies that are required and add value to the proper functioning of the Board.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
16
Independence of Directors
During Financial Year 2023, the Board consisted of nine (9) Independent Non-Executive Directors.
During the year under review, the Board included also one (1) Non-Independent Non-Executive Director and two (2) Executive
Directors (as indicated on pages (xiii) to (xv) of the Annual Report). In determining the independence or otherwise of its Directors,
the Board has considered, amongst others, the notion of independence as contained in the Code, the Bank’s own practice as well as
general good practice principles.
Moreover, the Non-Executive Directors have to prepare a written annual declaration of their independence to the Board in line with
Code Provision 3.4 declaring that they undertake:
• To maintain in all circumstances his/her independence of analysis, decision and action;
• Not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
• To clearly express his/her opposition in the event that s/he finds that a decision of the Board may harm the company.
The Board believes that, by definition, employment with the Bank rendered Director James Grech as Non-Independent from the
Institution. However, the fact that Mr Grech is an employee of the Bank should not, in any manner, detract from the said Non-
Independent Director’s ability to maintain independence of analysis, decision and action at all times. Moreover, having considered Mr
Grech’s role and duties within the Bank as a Bank employee, the Bank deemed Mr Grech to be a Non-Executive Director.
Appointment of Executive Directors
The appointment of Executive Directors is regulated by article 24 of the Articles of Association. In accordance with the said article,
the CEO of the Bank shall ex officio become an Executive Director by virtue of his office and shall remain in office until the tenure of
office as CEO.
The Non-Executive Directors shall appoint at least one (1) other Executive Director on the Board from amongst the Senior Management
and may also appoint a third Executive Director if the Non-Executive Directors consider it in the best interest of the collective
knowledge and competence of the Board to do so. To date, one (1) additional Executive Director has been appointed. Until 5 April
2023, that position was held by the Chief Risk Officer (CRO). Following the CRO’s resignation from the Bank he automatically also
resigned from the Bank’s Board of Directors. On 1 August 2023, the Group Chief Compliance Officer was appointed as the second
Executive Director on the Board, which is in line with the Bank’s endeavours to give the necessary importance to the Compliance and
Anti-Financial Crime function even at Board level.
Appointment of Non-Executive Directors
Article 23.3 of the Bank’s Articles of Association specifies that the Board of Directors shall consist of a maximum of three (3) Executive
Directors and a maximum of nine (9) Non-Executive Directors. In the event of the co-option to the Board, pursuant to article 27A,
of a maximum of two (2) additional Non-Executive Directors, the maximum number of Non-Executive Directors shall be eleven (11).
The appointment of the Non-Executive Directors is governed by articles 25 and 27A of the Articles of Association and appointments
may be made as follows:
a. By Qualifying Shareholders – namely members holding at least 10% of the issued share capital of the Bank having voting rights,
that are entitled to nominate, for the approval of the Nominations and Remuneration Committee, one person for each 10% voting
shares held; and
b. By Non-Qualifying Shareholders not having a Qualifying Shareholding, but who individually or in aggregate hold not less than
€50,000 in nominal value of shares having voting rights in the Bank and who are entitled to make recommendations for the
approval of the Nominations and Remuneration Committee; or
c. By the Nominations and Remuneration Committee itself seeking the recruitment of fit and proper persons having the right
attributes that can add value to the Board of Directors.
d. By the Non-Executive Directors pursuant to Article 27A of the Articles of Association as explained in further detail below.
Save for the provisions in paragraph (d) above, all Non-Executive Directors are appointed by the Bank’s shareholders during the
Annual General Meeting.
Appointment of Additional Non-Executive Directors by Co-Option
Article 27A of the Bank’s Articles of Association provides for the additional appointment of Non-Executive Directors by co-option.
The objective of this article is to address situations where, notwithstanding the efforts that may be made by the Nominations and
Remuneration Committee to ensure that the Board of Directors of the Bank has the necessary mix of skills and experience, there could
arise situations where those efforts could not yield the appropriate mix and combination of skills, or where the regulator could require
certain skills which may not be present on the Board. In these situations, the Board would need to react in a relatively short time to
ensure that the composition of the Board fulfils its ultimate aim.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
17
Accordingly, this Article empowers the Board of Directors (specifically, the Non-Executive Directors) to co-opt up to a maximum of
additional two Non-Executive Directors to sit on the Board of Directors of the Bank, only in those instances where the nine (9) Non-
Executive Director positions were already filled, but the then current Board complement did not have the composition required by
regulation or in the opinion of the Nominations and Remuneration Committee, the Board still did not have the appropriate mix of
collective skills, knowledge and experience. Such co-opted Non-Executive Directors would be appointed for a three (3) year term with
eligibility for re-appointment.
The two (2) Non-Executive Directors who were co-opted to the Board pursuant to Article 27A are Alfred Mifsud and Diane Bugeja.
However, Alfred Mifsud resigned from the Board with effect from 27 April 2023. No other Non-Executive Director was co-opted on
the Board in Mr Mifsud’s stead.
Nominations and Remuneration Committee
All Directors, irrespective of the manner in which they are proposed, can only proceed to the next steps leading to their taking office,
following the approval of their nomination by the Nominations and Remuneration Committee. In this context, the Nominations
and Remuneration Committee is the organ that, after having scrutinised the list of candidates to ensure that the Board will have
the appropriate collective knowledge, experience and competence, will then place the list of approved candidates for Board
recommendation for election at the Annual General Meeting (AGM). When discussing new appointments to the Board, the Nominations
and Remuneration Committee ensures that the skills, knowledge and experience which already exist in current Board members, as
well as those needed on the Board, are evaluated. In the light of such an evaluation the Nominations and Remuneration Committee
prepares a description of the role, skills, experience and knowledge needed from Directors.
The Nominations and Remuneration Committee informs the Chairman, and the other Non-Executive Directors, about the expected
time commitment in their roles on the Board of Directors of the Bank, and that they undertake to dedicate sufficient time for Board
and Board Committee meetings, preparation ahead of such meetings, as well as training (both induction and ongoing training). The
other significant commitments, including time involvement, of the Chairman and the Non-Executive Directors, are disclosed to the
Nominations and Remuneration Committee before their appointment. All Directors may not take additional directorships on boards of
other entities without the prior approval of the Nominations and Remuneration Committee.
No member of the Nominations and Remuneration Committee is present while his nomination as a Director of the Bank is discussed
by the Nominations and Remuneration Committee.
Rotation of Directors
The Bank has a system of rotation of Directors aimed at ensuring a certain level of continuity within the Board of Directors. The
system of rotation of Directors contemplates the retirement of one-third of the Non-Executive Directors each year, with the remaining
two-thirds of the Board retaining office. This is aimed at providing stability of policymaking and implementation. Those Directors
whose turn it is to retire from office, pursuant to the rotation system, will be eligible for re-appointment, subject to approval by the
Nominations and Remuneration Committee. The Directors to retire first shall be determined as follows:
a. Those Non-Executive Directors who wish to retire and who do not seek re-appointment prior to the full term of their appointment;
otherwise,
b. To the extent that there are no Non-Executive Directors who wish to retire and who do not seek re-appointment prior to the full
term of their appointment, those who retire first shall be the Non-Executive Directors who have been longest in office, including
by virtue of re-election, since their first election, but as between persons who became Directors on the same day or in the event
that the duration in office cannot be properly determined those to retire shall (unless they otherwise agree among themselves)
be determined by lot.
A retiring Director shall only be eligible for re-election provided that such person did not occupy the office of Non-Executive Director
for an aggregate period of more than twelve (12) years in any period of fifteen (15) years.
Pursuant to Article 28.2 of the Bank’s Articles of Association, one-third of the Bank’s Non-Executive Directors are due to retire at the
Annual General Meeting (AGM), by virtue of their holding office longest, including by re-election or reappointment.
During 2024, the most senior Directors who have been longest in office, including persons who became Directors on the same day, are
Anita Mangion, Kevin J. Borg, Elizabeth Camilleri and Godfrey Swain. Given that all four (4) Directors were appointed (re-appointed
in the case of Anita Mangion) on the Board on the same day during the 2021 AGM, pursuant to Article 25 of the Bank’s Articles of
Association it was determined by lot that Directors Anita Mangion, Kevin J. Borg and Elizabeth Camilleri shall retire during the 2024
AGM. All three (3) Directors are eligible for re-appointment on the Board. Mr Kevin J. Borg and Ms Elizabeth Camilleri have decided
not to seek re-appointment on the Board at the forthcoming AGM.
Ms Anita Mangion has been re-appointed as Non-Executive Director of the Bank for another term. Ms Mangion has been re-appointed
by the Government of Malta as one of the Qualifying Shareholders of the Bank.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
18
Therefore, the Bank has two (2) vacancies for Non-Executive Director to be filled during the 2024 AGM. On 8 February 2024, the
Bank issued a call for interested persons who would like to submit their nomination for appointment as Non-Executive Director on
the Board pursuant to Article 25 of its Articles of Association. The Bank received nine (9) nominations for the two (2) vacancies. An
assessment of eight (8) nominations is in the process of being undertaken by the Nominations and Remuneration Committee, whereas
one (1) nomination has been withdrawn. The Nominations and Remuneration Committee will be making its recommendations to the
Board of Directors for shareholders’ consideration at the forthcoming AGM.
Number of Directorships held by members of the Board of Directors as at end December 2023, including the appointment of the
Board of Bank of Valletta p.l.c.:
Name of Director
Number of Directorships held:
Executive Director (ED) &
Non-Executive Director (NED)
Gordon Cordina (Chairman)* 3 NED and 1 ED
Kenneth Farrugia** 3 NED and 1 ED
Anita Mangion* 2 NED
Diane Bugeja 1 NED
James Grech 3 NED
Deborah Schembri 1 NED
Kevin J Borg 1 NED
Godfrey Swain** 7 NED
Elizabeth R Camilleri 1 NED
Nicola Angeli 1 NED
Robert Suban 4 NED
Anatoli Grech*** 1 NED and 1 ED
* Gordon Cordina and Anita Mangion are not subject to the provisions of Article 91 of the CRD V (Capital Requirements
Directive) and Article 14 (3) (a) of the Banking Act, 1994 (Chapter 371, Laws of Malta) as regards the number of directorships
held by them in view of their appointment in a national representative capacity.
** Two (2) of the directorships held by Kenneth Farrugia and six (6) of the directorships held by Godfrey Swain refer to directorships
of companies in the same group namely MAPFRE MSV Life p.lc. (50% owned by Bank of Valletta p.l.c.), Mapfre Middlesea p.l.c.
and Vallcara Limited, Solvanova Limited, and Eight Points Limited (all three (3) companies owned by the same shareholders),
and therefore count as a single directorship pursuant to Article 14 2A (c) (i) of the Banking Act.
*** The two (2) directorships held by Anatoli Grech refer to directorships of companies in the same group of BOV Group and
therefore count as a single directorship pursuant to Article 14 2A (c) (1) of the Banking Act.
Principles 4 and 5: The Responsibilities of the Board and Board Meetings
The Board meets approximately once a month, unless further meetings are required for the Board to discharge its duties effectively.
The Board discusses and decides upon matters relating to the Bank’s business. During the financial year under review, the Board met
twenty-one (21) times.
The Board regularly reviews and evaluates corporate strategy, major operational and financial plans, risk policies, performance
objectives which are benchmarked against industry norms and business alternatives. The strategy, processes and policies adopted for
implementation are regularly reviewed by the Board so that corrective measures can be taken to address any deficiencies and ensure
the future sustainability of the enterprise. The Board also monitors implementation and corporate performance within the parameters
of all relevant laws, regulations and codes of best business practice. The Board has a formal schedule of matters reserved for its
decision and also delegates specific responsibilities to Board Committees.
The Board ensures that it has the appropriate policies and procedures in place which guarantee that the Bank and its employees
maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business and ethical
standards.
Notice of the dates of upcoming meetings, together with supporting material, are circulated well in advance to Directors to allow
ample time to appropriately consider the information prior to the next Board meeting. Furthermore, advance notice is also provided
of ad hoc meetings to allow sufficient time to re-arrange commitments.
After each Board meeting, minutes that faithfully record attendance, matters discussed and decisions taken, are prepared and
circulated to all Directors as soon as practicable after the meeting.
Members of Senior Management attend Board Meetings by invitation on a regular basis.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
19
Directors’ attendance for Board Meetings during FY 2023 was as follows:
Directors’ Name Independent Directors/ Non-Independent
Directors/ Executive Directors (ED)/
Non-Executive Directors (NED)
Number of Meetings held: 21
Meetings attended by
Directors:
Gordon Cordina (Chairman) Independent NED 21
Alfred Lupi
1
Independent NED 8 (out of 10)
Antonio Piras
1
Independent NED 1 (out of 10)
James Grech
2
Non-Independent NED 17
Anita Mangion Independent NED 20
Alfred Mifsud
3
Independent NED 9 (out of 10)
Diane Bugeja Independent NED 19
Miguel Borg
4
Independent NED 6 (out of 7)
Elizabeth Camilleri Independent NED 20
Kevin J. Borg Independent NED 20
Godfrey Swain Independent NED 20
Kenneth Farrugia ED 21
Deborah Schembri Independent NED 20
Nicola Angeli
5
Independent NED 11 (out of 11)
Robert Suban
6
Independent NED 11 (out of 11)
Anatoli Grech
7
ED 7 (out of 7)
1
Antonio Piras and Alfred Lupi resigned during the Annual General Meeting held on 25 May 2023. Antonio Piras was excused
from attending a number of Board meetings due to health reasons.
2
On 28 November 2023, the Bank resolved to apply with immediate effect the Policy as approved by the Board during its 926th
meeting held on 11 October 2023 which provides that a Director who has ongoing legal proceedings against the Bank or any of
the Bank’s subsidiaries, while he/she is still in office will immediately withdraw from participating in Board meetings whilst his/
her case against the Bank is ongoing. Consequently, in view of the prevailing circumstances, Director James Grech did not attend
any of the Board meetings held after the date of the coming into force of the Policy.
3
Alfred Mifsud resigned from his role as a Non-Executive Director on the 27 April 2023.
4
Miguel Borg resigned from the Bank and from his role as Executive Director of the Board with effect from 5 April 2023.
5
Nicola Angeli was appointed to the Board during the Annual General Meeting held on 25 May 2023. His appointment was
subject to Regulatory Approval which was duly received on the 1 August 2023. Pending receipt of Regulatory Approval, Mr Angeli
attended Board meetings as part of his induction process.
6
Robert Suban was appointed to the Board during the Annual General Meeting held on 25 May 2023.
7
Anatoli Grech was appointed to the Board with effect from 1 August 2023.
Board Committees
The Board also delegates specific responsibilities to Committees, which operate under their respective formal Terms of Reference. In
this respect, the Board has established the following Committees:
The Audit Committee
The Audit Committee’s Terms of Reference include the monitoring of the financial reporting process, the effectiveness of the Bank’s
internal control, internal audit and risk management systems and the audit of the Bank’s annual and consolidated accounts. The Audit
Committee is also responsible for overseeing the establishment of accounting policies by the Bank. The primary purpose of the Audit
Committee is to protect the interests of the Bank’s shareholders and assist the Directors in conducting their role effectively so that the
Bank’s decision-making capability and the accuracy of its reporting and financial results are maintained at high level at all times. The
Audit Committee has established internal procedures and monitors these on a regular basis. The Audit Committee also scrutinizes and
approves related party transactions in line with the Related Party Transactions Policy. The Audit Committee considers the materiality
and the nature of the related party transactions carried out by the Bank to ensure that the arms’ length principle is adhered to at all
times. The Audit Committee, in line with the Capital Markets Rules, is involved in and monitors the external audit processes, performs
oversight on the internal audit function and facilitates communication between the two. As part of the monitoring of the external
audit process, the Audit Committee endorses the overall selection process of the statutory auditors, which commences from Request
for Proposal (RFP) which is issued by the Bank, leading to the interview of the audit firms who express an interest in the Bank’s RFP.
The Audit Committee is involved in the interview of the shortlisted audit firms and makes its recommendation for Board approval. In
so far as the reviewing and monitoring of non-audit services to the audited entity is concerned, the Bank maintains a list of non-audit
services which the statutory auditors are permitted to undertake in terms of regulations, which list requires the approval of the Audit
Committee. Any non-audit services which fall outside this list requires the approval of the Audit Committee.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
20
During the period under review, the Committee conducted its annual self-assessment, confirming its effectiveness in adding significant
value to the oversight function of the Board.
In terms of Capital Markets Rules 5.117, 5.118 and 5.118A, the Audit Committee is composed of the following three (3) Non-
Executive Directors, all of whom are considered as independent of the Bank, since they are free from any business, family or other
relationship with the Bank or its management that may create a conflict of interest such as to impair their judgement. The Non-
Executive Director appointed on the Audit Committee whom the Bank deems to be competent in accounting by virtue of her being a
professional accountant is Deborah Schembri. Until 25 May 2023, besides Deborah Schembri there was also Alfred Lupi on the Audit
Committee who was deemed to be competent in accounting by virtue of his being a professional accountant.
1. Ms Deborah Schembri is a Certified Public Accountant. She holds a Masters in Business Administration from Henley Management
College (UK) and she holds an Advanced Diploma in Retirement Provision pursued with the UK Pensions Management Institute.
She is appointed Chair of the Audit Committee by the Board and is the Director whom the Bank considers as competent in
accounting. Ms. Schembri possesses successful experience in strategy formulation, corporate governance, business and product
development, customer relationships and employee engagement. She has over twenty (20) years’ experience in the financial
services and various other local industries. Currently, Ms Schembri holds the role of Group Chief Financial Officer of a major
local diversified group of companies operating locally and internationally and also sits on committees within the Malta Chamber
of Commerce and the Institute of Financial Services Practitioners. She had also worked with one of the Big Four audit firms.
2. Mr Godfrey Swain is a Member of the Bank’s Audit Committee, ESG Committee and a Director on the Board of MAPFRE MSV
Life p.l.c. and Mapfre Middlesea p.l.c. He is an international executive with thirty (30) years of banking experience, having
served as CEO of Myanmar Citizens Bank (MCB) based in Yangon tasked with executing a banking transformational strategy in
partnership with the International Finance Corporation (IFC), an arm of the World Bank. Mr Swain previously served as Deputy
CEO, Head of Retail Banking and Marketing based in Ho Chi Minh City.
Mr Swain served as a senior Hong Kong and Shanghai Bank (HSBC) international executive for twenty years holding key roles
as Managing Director and Country Head of Retail Banking and Wealth Management for HSBC in Japan, Vietnam and previously
Malta where he also held roles of Head of Marketing and Communications and founding CEO/MD of HSBC Life Assurance
(Malta) Limited.
3. Mr Nicola Angeli is currently a Member of the Audit Committee. He has an extensive knowledge of the European banking sector,
accumulated over ten (10) years of experience working on transactions in the private and public markets.
Based in Italy, he started his career in the Debt Capital Markets team of UniCredit S.p.A., where he assisted medium and large
corporates in the execution of financing transactions in the fixed-income market. In 2015 he moved to his current position in
the Group M&A and Corporate Development team, where his responsibilities focus on the carrying out of M&A proprietary
transactions for the UniCredit Group. Mr Angeli was involved in several transformational inorganic projects, including both M&A
and capital markets deals.
Mr Angeli has a Masters degree cum laude in Banking, Business and Financial Markets and a Bachelor of Science cum laude in
Economics, both from the University of Trento (Italy).
More detail on the brief resumes of the Audit Committee Members is found on pages (xiii) to (xv) of the Annual Report.
In view of the diverse skills and professional experience of each of the Audit Committee Members, the Bank considers the Audit
Committee as a whole to have the adequate competence and to meet the independence criteria as required by the Capital Markets
Rules 5.118.
Audit Committee Members’ Attendance during FY2023 was as follows:
Members
Meetings Held: 13
Meetings attended by member:
Alfred Lupi (Chair)* 5 (out of 5)
Alfred Mifsud** 5 (out of 5)
Deborah Schembri (Chair) 13
Godrey Swain*** 8 (out of 8)
Nicola Angeli**** 8 (out of 8)
* Resigned as Chairperson and Director with effect from the 25 May 2023.
** Resigned as an Audit Committee member and Director with effect from the 27 April 2023.
*** Appointed as an Audit Committee member with effect from the 25 May 2023.
**** Appointed as an Audit Committee member with effect from the 25 May 2023. Until Regulatory approval was received on
the 1 August 2023, Mr Angeli attended Audit Committee meetings in an observer capacity.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
21
The Chief Executive Officer, the Chief Risk Officer and the Group Chief Internal Auditor attend Audit Committee meetings. The Chief
Financial Officer and a representative of the External Auditors attend the Audit Committee meetings by invitation. KPMG are the
Group’s statutory auditors. A designated person from the Office of the Company Secretary acts as Secretary to the Audit Committee.
The Nominations and Remuneration Committee – This is considered under the Remuneration Report.
The Risk Committee
The Risk Committee assists the Board in assessing the different types of risks to which the Organisation is exposed. This Committee is
responsible for the proper implementation and review of the Group’s risk policies related mainly, but not restricted to, Credit, Market
and Operational Risks. It reports to the Board on the adequacy, or otherwise, of such policies. The Committee is also responsible
for reviewing delegated limits, together with an oversight of the Group’s monitoring and reporting systems, to ensure regular and
appropriate monitoring and reporting on the Group’s risk positions.
Risk Committee Members’ attendance during FY2023 was as follows:
Members
Meetings Held: 13
Meetings attended by member:
Alfred Mifsud (Chair)* 6 (out of 6)
Antonio Piras** 1 (out of 1)
Godfrey Swain** 6 (out of 6)
Robert Suban (Chair)*** 7 (out of 7)
Deborah Schembri**** 12 (out of 12)
Gordon Cordina***** 6 (out of 7)
* Resigned as Chairperson and Director with effect from the 27 April 2023.
** Resigned as a Member of the Risk Committee with effect from the 25 May 2023.
*** Appointed as a Chairperson of the Risk Committee with effect from the 25 May 2023.
**** Appointed as a Member of the Risk Committee with effect from the 16 February 2023.
***** Appointed as a Member of the Risk Committee with effect from the 25 May 2023.
The Chief Executive Officer, the Chief Risk Officer, and the Group Chief Compliance Officer attend Risk Committee Meetings. A
designated person from the Office of the Company Secretary acts as Secretary to the Risk Committee.
The above information on the Risk Committee, together with the information contained in the Pillar 3 Disclosures which are available
on the Bank’s website, is also to be considered as a disclosure for the purposes of Regulation 575/2013 of the European Parliament
and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.
The Compliance and Anti-Financial Crime Committee
The primary objective of the Compliance and Anti-Financial Crime Committee is to assist and guide the Board of Directors in the
discharge of their obligations imposed from time to time by regulation in the area of financial services and in light of the Bank acting
as a credit and financial institution licensed to provide services under different laws and within the framework of the Compliance
Function as defined in the Compliance Charter and as approved by the Board of Directors. The Committee is also responsible for
assisting the Bank in combating financial crime and money laundering activities.
Compliance and Anti-Financial Crime Committee Members’ attendance during FY2023 was as follows:
Members
Meetings Held: 6
Meetings attended by member
Diane Bugeja (Chairperson) 6
Gordon Cordina 6
Anita Mangion 6
The Chief Executive Officer, the Chief Risk Officer, the Group Chief Compliance Officer and the Money Laundering Reporting Officer
attend the Compliance and Anti-Financial Crime Committee meetings. A designated person from the Office of the Company Secretary
acts as Secretary to the Compliance and Anti-Financial Crime Committee.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
22
The Environmental, Social, and Governance (ESG) Committee
The primary purpose of the ESG Committee is to secure board-level oversight of strategic climate and environmental-related risks and
opportunity management, as well as strengthening the governance structure in relation to ESG factors. The Committee acts as the
approval Board body for the decisions in relation to the Sustainability strategy and its implementation, and senior line management
for points of escalation for decisions relating to climate work underway across the business line of the Bank. The ESG Committee is
chaired by the Bank’s Chairman and is composed of three (3) other Non-Executive Directors, one of whom is also a Member of the
Risk Committee. Representatives from relevant business functions are invited to attend ESG Committee meetings.
The ESG Committee Members’ attendance during FY2023 was as follows:
Members
Meetings Held: 4
Meetings attended by member
Gordon Cordina (Chair) 4
Anita Mangion 4
Elizabeth Camilleri 3
Godfrey Swain 4
Suitability Policy
The Bank’s Suitability Policy applies to all Directors, Executive Committee Members, and Key Function Holders within the BOV
Group (collectively termed as “Subject Persons”). The Suitability Policy aims to ensure the suitability of the Board of Directors and the
Executive Committee, as well as other Key Function Holders, not just at the inception of their appointment but also throughout the
duration of their appointment. In this context, suitability refers to the ability of all Subject Persons (SPs) to ensure, a sound and prudent
management of the financial institution, viewing the safeguarding of the financial system and the interests of respective clients,
depositors, shareholders, and other creditors. Subject Persons (SPs) must comply with requirements of fitness and appropriateness,
professional qualification, independence of mind, and time commitment (availability).
Board Diversity Policy
The Board Diversity Policy (the Policy) has been drafted in line with European Securities and Markets Authority (ESMA) and European
Banking Authority (EBA) guidelines on the assessment of suitability of members of the management body and key function holders,
as well as in line with the requirements of Article 88 of the CRD V (Capital Requirements Directive).
The Policy provides that the Board aspires to maintain the following diversity objectives:
i. Gender:
The Board is committed to maintain at least three (3) female Board members and aims to achieve a minimum of 33% female
representation on the Board by end of 2023. During 2023 there were four (4) female Board members on the Board. As a result, as at
the end of Financial Year 2023, the Bank had a 33% female representation on the Board, thereby achieving its target.
ii. Age:
Pursuant to the Bank’s Articles of Association, the age limit for all Non-Executive Directors shall be seventy-five (75) years. In addition,
the Board shall endeavour to ensure that not all Directors are in the same decade of their lives.
iii. Professional experience:
Directors should preferably have at least five (5) years professional experience in at least one of the following sectors: financial,
banking, accounting and auditing, risk management, governance, compliance and anti-financial crime and information technology.
iv. Educational background:
Directors should have a sound educational background with a qualification in any of the areas of banking, business administration,
economics, risk management, accountancy and auditing, and law.
v. Geographical provenance:
Given the size of Malta as a jurisdiction, coupled with the fact that BOV’s level of international activity is very limited, for BOV,
geographical provenance is not a relevant diversity factor. Notwithstanding, the Bank shall, where possible, endeavour to bring
international experience to the Board table, which can be achieved by having directors on the Board with prior relevant international
professional background.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
23
For FY2023, the Nominations and Remuneration Committee prepared a report for the Board outlining the process implemented in
relation to appointment of Board members on the Board. Such report also included the measurable objectives set for implementing
the Policy, as well as the progress made towards achieving those targets. The BOV Diversity Report for FY 2023 detailed the process
relating to the:
i. Appointment of the Non-Executive Directors during the 2023 AGM, whereby Directors Robert Suban and Nicola Angeli were
appointed Directors on the Board following a suitability assessment process by the Nominations and Remuneration Committee.
ii. Appointment process of Executive Director Anatoli Grech, whereby following a suitability assessment process by the Nominations
and Remuneration Committee, Mr Grech was appointed Executive Director on the Board with effect from the 1 August 2023,
upon receipt of Regulatory approval.
The BOV Diversity Report also included the progress made by the Bank during 2023 to maintain or improve its Board diversity
objectives and targets as defined in the Policy. For FY2023, the Bank has met its Board diversity objectives and targets in all areas,
including its target to have at least a 33% female participation on the Board.
Learning and Self-Development Policy
Aligned with the Bank’s strategic vision, the Learning and Development Centre serves as a vital catalyst for ongoing skill enhancement,
ensuring the Bank remains future proof. The Bank’s guiding principle is encapsulated in the mantra ‘Learn, Grow, and Empower Others.’
We are dedicated to fostering a dynamic workforce by cultivating resource liquidity through skill development, continually refining
the talent pipeline through ongoing upskilling initiatives, and nurturing exemplary leaders through robust leadership development
programs.
The Bank offers professional training courses across a broad spectrum of subjects. Testament of the high standard of our courses is
the recognition received from the Malta Further and Higher Education Authority (MFHEA) through its accreditation of several courses
offered by the Bank. In fact, BOV is licensed as a Higher Education Institution (License Number: 2018-003) and offers employees
MQF Level 5 and Level 6 qualifications such as Awards in Managing Customer Excellence, Management and Leadership, Train the
Trainer, Investments and Credit for Retail Banking and Business. In 2023, 151 employees graduated in one or more of these awards.
The Learning and Development team delivers customised and specialised training initiatives across various pillars, including Onboarding
and Customer Centricity, Personal Development, as well as Leadership Development programmes. Additionally, the Bank offers an
e-learning platform designed to empower its employees by providing opportunities for further self-development, both within the
workplace, on their mobiles and the convenience of their homes. The following table depicts the average hours of training undertaken
by all employees during FY2023.
Hours
Average number of hours of training (per person) that the
Group’s employees have undertaken during FY2023
28.7
Total number of hours of training during FY2023 63,390
During the final quarter of 2023, a Learning Needs Analysis was undertaken to ensure the delivery of effective learning provisions and
skills throughout the Bank. This initiative aims to maintain business agility and responsiveness to future changes. The primary objective
is to enhance employees’ skills, bolster employee retention, and address business and regulatory requirements in an ever demanding
and rigorous regulatory landscape. Internally crafted training programs are seamlessly integrated with external training opportunities
to not only expand employees’ current skill sets but also introduce fresh perspectives on thinking and problem-solving.
The Bank remains steadfast in its dedication to providing unwavering support to its employees, both in their professional and academic
pursuits. This commitment is reflected in the allocation of essential resources and time to facilitate continuous development, as
outlined in the Learning and Self-Development Policy. This policy encourages all employees within the Group, whether on indefinite or
definite employment, to actively pursue self-development. To facilitate this, the Bank extends assistance through grants, study loans,
and study/dissertation leave, all aligned with the current business needs of the institution. More than 100 applications for different
qualifications were approved during 2023.
Suitability of Board of Directors
The Nominations and Remuneration Committee undertakes a suitability assessment of Members proposed to be appointed on the
Board of Directors or on the Executive Committee, as well as individuals proposed to be appointed for Key Function Holder positions.
This comprehensive assessment is based on the individual’s knowledge, skills and expertise. Due consideration is also given to criteria
of reputation, conflicts of interest, independence of mind and time commitment.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
24
During FY2023, the Nominations and Remuneration Committee carried out an internal suitability assessment exercise to assess the
ongoing fitness and properness of Members of the Board of Directors. The objective of this suitability assessment was to:
i. Perform an individual suitability assessment for the Board of Directors in relation to their reputation, knowledge, skills, and
experience to perform their duties; acting with honesty, integrity and independence of mind; and time commitment to their role;
ii. Perform a collective suitability assessment of the Board of Directors to assess the collective skillset, expertise and diversity of the
Board of Directors.
The assessment exercise was based on the detailed guidelines issued by the European Securities and Markets Authority (“ESMA”)
and the European Banking Authority (“EBA”), specifically Directives 2013/36/EU and 2014/65/EU (ESMA 35-36-23) and EBA/
GL/2021/06 both issued on 2 July 2021 (hereinafter referred to as “the Guidelines”).
From this assessment exercise it emerged that all Members of the Board of Directors were deemed to be individually and collectively
suitable.
Executive Committee
The Executive Committee is entrusted with the overall responsibility for monitoring and managing the Group’s financial and operational
performance, overseeing the execution of the Group’s strategy, monitoring customer experience, and taking the necessary decisions
to ensure that the Bank is operating with the applicable rules and regulations.
During financial year 2023, the Group reviewed the composition of the Executive Committee, to enable the Group to deliver its
strategy more efficiently and ensure having the best possible personnel with the right skill set to lead each area. With expertise
in accountancy, risk, economics, business, compliance, anti-financial crime, IT, strategic, project delivery and implementation, and
digitisation, the Members of the Executive Committee are deemed to have the necessary collective knowledge, skills, and competence
to manage the business of the Group, exert oversight of the Group’s operations, recommend and follow a strategic plan for the Bank
and its subsidiaries, overseeing the Group’s financial, business and operational performance, establish and maintain a risk appetite
framework, organise the allocation and adequacy of the Group’s human resources and ensure that the Bank has a reliable and
sustainable IT infrastructure, amongst other functions.
The Bank’s Executive Committee meets at least monthly. It is chaired by the Chief Executive Officer. The other Members of the
Committee are:
• Chief Financial Officer
• Chief Risk Officer
• Chief Operations Officer
• Chief Commercial Officer
• Chief Personal & Wealth Officer
• Group Chief Compliance Officer
• Chief Technology Officer
• Chief Digital Officer
• Chief Strategy, Transformation, and Data Officer
• Chief People & Culture Officer
The Group Chief Internal Auditor has an open invitation to attend all Executive Committee meetings at her discretion. Other personnel
may by invitation, attend Executive Committee Meetings.
More detail on the Executive Committee members and their experience is found in their brief CV on pages (xvi) to (xix) of the Annual
Report.
Besides the Executive Committee, the Bank also has the following seven (7) Executive Committees:
• Asset and Liability Management Committee
• Internal Control and Risk Management Committee
• Credit Committee
• Credit Sanctioning Committee
• Product Governance and Pricing Committee
• Projects Evaluation Committee
• Data Council
More detail on each of these Executive Committees is found below.
The Asset Liability Management Committee (ALCO) is an integral part of the Bank. The Committee takes an integrated view in
managing the Group’s assets and liabilities to achieve an optimal balance between risk and return. ALCO evaluates the asset and
liability cash flows, profit and loss and balance sheet financial forecasts and the management of integrated exposures at a consolidated
level, to enable it to give strategic direction to the business. Consideration is given, inter alia, to the funding and investment strategy,
solvency, liquidity and interest rate risks.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
25
ALCO monitors the liquidity and capital position of the Group on a continuous basis by evaluating and approving the Internal Liquidity
Adequacy Assessment Process (ILAAP) and Internal Capital Adequacy Assessment Process (ICAAP) respectively on an annual basis
and making use of forecasts to ensure that business and regulatory requirements are met. Additionally, the Committee ensures
that the investment of the Bank’s funds is conducted in accordance with the approved investment strategy and exercises executive
authority in the area of interest rate management by setting the interest rates payable on deposit products. The Committee further
serves as a Steering Committee for the Bank’s Recovery and Resolution Plan. ALCO meets at least once a month to analyse financial
information and to ensure cautious management of balance sheet and market risks. The Committee is chaired by the Chief Financial
Officer and is composed of members of Senior Management.
The Internal Control and Risk Management Committee (ICRMC) was set up with the responsibility for the oversight and coordination
of risk management, internal controls, compliance, and AML/CFT across the BOV Group. The ICRMC includes the following five
subcommittees, namely:
a) Operational Risk Management Forum;
b) Outsourcing Risk Management Forum;
c) Environmental, Social, and Governance (ESG) Risk Management Forum;
d) Financial Crime Compliance Management Forum; and
e) Compliance Management Forum.
The above listed Fora continued to meet at predefined frequency during 2023 submitting for ICRMC deliberations succinct and
focused presentations related to:
• Main Forum outcomes and action points;
• Approval notifications and escalations to the ICRMC.
The ICRMC is responsible for the proper implementation and review of the Group’s risk and internal control policies. It reports to
the Board on the adequacy, or otherwise, of such policies. The ICRMC is also responsible for advising and supporting the Executive
Committee in the formulation of the Bank’s risk appetite and to advise and support in the monitoring of the Group’s actual and future
risks. The ICRMC meets at least once a month to advise and support the Board in assessing the different types of risks to which the
Group is exposed, whilst also taking a forward-looking perspective in respect of emerging risks. The Committee is also responsible for
reviewing and discussing issues raised by the control functions on the effectiveness of the internal control systems.
The Committee provides effective management oversight over the Group’s main risks, AML and Compliance initiatives as well as the
progress on any remediation action required by the supervisory authorities. The ICRMC is chaired by the Chief Risk Officer, whilst
the Group Chief Compliance Officer (GCCO) serves as the Deputy Chairperson. All other Executive Committee members – except
(1) the Chief Strategy, Transformation, and Data Officer, and (2) the Chief People and Culture Officer – are members of the ICRMC.
The Credit Committee (CC) is responsible for assisting the Executive Committee in implementing and monitoring the credit strategy,
Non-Performing Loan (NPL) strategy, level of credit provisioning and debt management. It advises and supports the Executive
Committee in the formulation of the Bank’s risk appetite and strategy on credit and also approves policies in relation to credit in line
with the Policy Governance Framework. The Provisions Committee, mainly tasked with the approval of the level of credit provisioning,
is a sub-committee of the Credit Committee and includes members from Finance, Business and Risk Management departments.
The Credit Committee is chaired by the Chief Risk Officer whilst the Chief Executive Officer acts as Deputy Chair. The other members
are the Chief Commercial Officer, Chief Personal and Wealth Officer, Chief Financial Officer, Head Credit Risk Management and
Head Business Banking, Reporting and Control. The Group Chief Internal Auditor is in attendance, whilst other members of Senior
Management are invited to attend the Committee as and when required.
The Credit Sanctioning Committee (CSC) was established to sanction/decide on credit facilities both in the performing and
non-performing categories. The CSC is a management committee reporting to the Executive Committee with escalation to Board
of Directors in line with the terms of reference. The Credit Underwriting session, for assets within the performing category handles
connected exposures above €10,000,000 whilst the Non-Performing Loans session, decides on non-performing exposures above
€5,000,000. Both sessions of the CSC are chaired by the Chief Risk Officer. Non-voting representatives from Corporate Business and
Risk may attend the Committee meetings by invitation.
The Product Governance and Pricing Committee (PGPC) is entrusted with ensuring that the Bank has in place a product governance
and pricing framework:
• A product approval matrix inclusive of delegated authority outline;
• A periodic review program of all products and services; and
• Assessment of product/service pricing and approval of changes in fees and charges; and
• Discontinuation of products and services.
In discharging its responsibilities, the Committee will ensure that both existing and new products are analysed in terms of the target
market, appropriateness, testing validation of methodologies have been considered, appropriateness of distribution channels for the
target market, that any potential conflicts of interest are managed, and that pricing adequately covers the risk and costs involved.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
26
The Committee is chaired by the Group Chief Compliance Officer. The other members of the Committee are the:
• Chief Executive Officer;
• Chief Financial Officer;
• Chief Personal & Wealth Officer;
• Chief Risk Officer;
• Chief Commercial Officer;
• Chief Operations Officer; and
• Chief Digital Officer.
The Project Evaluation Committee (PEC) is a vital link between recommending projects for budget approval, sanctioning project
initiation, and advising on necessary authorisation for project investments requiring higher authority. The PEC carefully scrutinises
project proposals within its scope, ensuring they align with the BOV’s strategy and overall direction. It evaluates project initiation
documents, assessing the robustness of costs, benefits, resource requirements, and delivery assumptions. Moreover, the PEC plays a
vital role in assuring the appropriate approvers regarding the soundness of submitted investments. The PEC evaluates potential impacts
on customer experience and internal processes, engaging with specialist Risk and Compliance teams for regulatory assessments and
challenges. The PEC also provides support and guidance to proposers to enhance approval rates while prioritising investments based
on strategic imperatives. It critically evaluates its performance against established KPIs/KRIs to ensure effective benefits realisation.
The PEC is chaired by the Chief Strategy, Transformation, and Data Officer, while the Chief Technology Officer, Chief Commercial
Officer, and Chief Operations Officer are standing members. The remaining members are selected based on their relevant expertise,
and they work together to ensure the successful implementation of projects.
The Data Council (DC) is entrusted to oversee all aspects of data management controls and governance within the Bank, including
the development oversight and implementation of data strategy, data systems, data Confidentiality, Integrity, Availability (CIA), data
ownership and governance and data plans and initiatives while managing the upstream and downstream impacts of data changes. The
responsibilities of the Committee moreover include deciding on BOV-wide data management approach and prioritization; reviewing
the progress on initiatives; resolving/ escalating issues and conflicts as needed (e.g., alignment on single source of truth) as well as
ensuring mitigation plans are in place for exposed / vulnerable risks on data.
Succession Policy
The Bank has implemented a comprehensive Succession Policy for the BOV Board of Directors, with primary objectives that include:
1. Establishing guidelines and processes for a planned and orderly succession of Directors (both Executive and Non-Executive) and
filling any unplanned vacancies on the Board;
2. Facilitating a seamless transition for new Board Members to contribute to the governance of the organization quickly and effectively;
3. Ensuring that the collective knowledge and skills of the Board align with the governance role’s requirements, taking into account
the objectives defined in the Board Diversity Policy;
4. Effectively preparing Board Members for leadership positions to prevent key people dependencies at the governing level.
The Nominations and Remuneration Committee oversees the Succession Policy for the BOV Board of Directors, as well as the
Succession Policy for Executive Committee members and Key Function Holders. This aligns with Code Provision 4.2.7 of the Capital
Markets Rules, as the Chairman of the Board of Directors also serves as the Chairman of the Nominations and Remuneration
Committee. The Board of Directors approves the Succession Policy for the BOV Board of Directors based on the Nominations and
Remuneration Committee’s recommendations.
Additionally, the Bank has established a Succession Policy for Executive Committee members and Key Function Holders. This policy
aims to define and sustain the Bank’s management and governance profiles over time, identify and develop new talent, and mitigate
risks associated with changes in executive function and leadership during transitional periods. Recognising the significance of
Succession Planning as an organisational practice, the Bank has undertaken the establishment of a framework for succession planning
across Categories 1 to 5. This plan is crucial for preserving corporate knowledge, especially in cases of retirements, promotions, or
attrition among key individuals, ensuring continuity across the Bank.
In conclusion, as an integral part of this initiative, an active successor identification exercise is currently in progress, accompanied by
meticulously crafted development plans to guarantee a seamless transition. This robust succession planning process plays a pivotal
role in cultivating an in-house talent pool that extends across the entire organisation.
Principle 6: Information and Professional Development
The CEO is appointed by the Board and is inter alia responsible for the recruitment and selection of Senior Management and consults
with the Nominations and Remuneration Committee and with the Board on the appointment of Senior Management. Training of
management and employees is a priority and internal and external training is provided by the Bank’s Training Centre specifically set up
for this purpose. The Bank also has a system in place which monitors management and staff morale.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
27
On joining the Board, a Non-Executive Director is provided with briefings by the CEO and Chief Officers on the activities of the Bank.
All Directors are provided with appropriate induction training and a dossier that, apart from incorporating relevant information on the
Bank, also includes the Bank’s Policy documents.
The Bank has a Board Governance Manual which provides a clear overview of the governance arrangements in place for the BOV
Board of Directors. It also has the objective of showing how various key elements of governance, oversight, risk management and
control link together and serves as a useful reference point for existing Directors and an induction manual for Directors newly
appointed to the Board.
Directors may, where they judge it necessary to discharge their duties as Directors, take independent professional advice on any
matter at the Bank’s expense. Directors have access to the advice and services of the Company Secretary, who is responsible for
ensuring adherence to Board procedures as well as good information flows within the Board and its Committees.
In addition, the Company Secretary directs Members of the Board to seminars or conferences which serve as professional development
for Directors in the discharge of their functions on the Board and on the Committees.
During the reporting year, Directors attended training relating to Strategy, Risk, Compliance and Anti-Financial Crime, Cyber-security,
Leveraged Transactions and IFRS17.
Directors are also required to attend mandatory e-learning modules on a number of subjects including Anti-Financial Crime (AFC),
Information Security Awareness, Conflicts of Interest, Market Abuse and GDPR.
Principle 7: Evaluation of the Board’s Performance
During the period under review, the Nominations and Remuneration Committee undertook an evaluation of the performance of the
Board, the Chairman and the Board Committees. The evaluation exercise was conducted through a Board Effectiveness and Diversity
Questionnaire (the “Questionnaire”) prepared by the Nominations and Remuneration Committee. Directors, including the Executive
Directors, were required to complete the Questionnaire.
The outcome result of the Questionnaire was a positive one with high scores attained in the majority of questions. The areas for
further improvement relate mainly to clearer understanding by the Board of the Bank’s core business, its strategic direction, and the
financial and human resources necessary to meet its objectives, as well as regular updates on performance against its objectives along
with further training and information to enable it to properly execute its obligations of monitoring and oversight.
The result of the Board Effectiveness Questionnaire was analysed by the Nominations and Remuneration Committee and discussed
at Board level. Actions are being taken to address those areas where an improvement may be necessary.
Furthermore, in accordance with the Board Diversity Policy, as part of the annual evaluation of the Board and its’ Committees
effectiveness, the Board Members are required to take into consideration the balance of all diversity aspects mentioned in the Board
Diversity Policy and the level of their diversification as a whole. In order to assess the Board’s effectiveness during FY2023 with
respect to the diversity aspects in the Board Diversity Policy, relating to gender, age, professional experience, educational background
and geographical provenance, the Questionnaire also included questions relating to these diversity aspects. The Board scored very
well with respect to all diversity aspects.
Principle 8: Committees
The Nominations and Remuneration Committee is dealt with under the Remuneration Report which also includes the Remuneration
Statement of Compliance in terms of Code Provisions 8.A.3 and 8.A.4, as well as in line with 8.B.7.
Principles 9 and 10: Relations with Shareholders and with the Market and Institutional Shareholders
The Bank recognises the importance of maintaining a dialogue with its shareholders and of keeping the market informed to ensure
that its strategies and performance are well understood.
The Board is of the view that during the year under review, the Bank has communicated effectively with the market through a number
of company announcements and press releases.
The Bank also communicates with its shareholders through the Bank’s Annual General Meeting (AGM). Further detail is provided
under the section entitled General Meetings. All Directors attend the AGM and are available to answer questions, if necessary.
The Chairman and the CEO also ensure that sufficient contact is maintained with major shareholders to understand issues and
concerns. During these meetings no market sensitive information is disclosed.
The Chairman also ensures that arrangements are made for all Directors to attend the AGM and for the Chair of the Audit Committee,
and for the Nominations and Remuneration Committee to be available to answer questions at the AGM.
Apart from the AGM, the Bank communicates with its shareholders by way of the Annual Report and Financial Statements, by
publishing its results on a six-monthly basis and through an annual newsletter to shareholders.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
28
The Bank also issues the Interim Directors’ Statement for Quarter 1 and Quarter 3 of its financial year. In addition, the Bank’s website
(www.bov.com) contains information about the Bank and its business, including an Investor Relations Section.
Furthermore, the Bank holds a meeting for stockbrokers and financial intermediaries, usually on a quarterly basis, to coincide with
the publication of its Financial Statements and the Interim Directors’ Statement. Other meetings with stockbrokers and financial
intermediaries are held as necessary. From time to time, the Bank also holds meetings with the Malta Association of Small Shareholders.
The Office of the Company Secretary maintains two-way communication between the Bank and its investors. Individual shareholders
can raise matters relating to their shareholding and the business of the Group, at any time throughout the financial year and are
given the opportunity to ask questions at the AGM or submit written questions in advance. In terms of Article 18.3 of the Articles
of Association of the Bank and Article 129 of the Companies Act, 1995 (Chapter 386, Laws of Malta), the Directors may call an
Extraordinary General Meeting on the requisition of shareholders holding not less than one-tenth of the paid-up share capital of the
Company.
Principle 11: Conflicts of Interest
Should a perceived, potential or actual conflict arise during the tenure of a directorship, a Director must disclose and record the
conflict in full and on time to the Board and subsequent reporting to the Compliance Department is required. A Director shall not
participate in a discussion concerning matters in which s/he has a conflict of interest unless the Board finds no objection to the
presence of such Director. In any event, the Director shall refrain from voting on the matter.
A Director having a continuing material interest that conflicts with the interests of the Group should take effective steps to eliminate
the grounds of conflict. Each Director should declare to the Group his or her interest in the share capital of the Group and should only
deal in such shares as allowed by law and in accordance with internal policies.
In 2023, the Board of Directors approved a Policy whereby a Director of the Bank who is involved in legal proceedings against the
Bank, or any of the Bank’s subsidiaries, while s/he is still a Director, is considered to have a material conflict of interest and therefore
must immediately withdraw from participating in Board meetings of the Bank until the legal proceedings against the Bank are closed.
Directors’ interest in the share capital of the Bank as of 31 December 2023 was as follows:
Beneficial Interest
*
Kenneth Farrugia* 94, 054 shares
Anatoli Grech* 6, 348 shares
Godfrey Swain 100, 000 shares
Diane Bugeja 29,310 shares
Robert Suban 14, 785 shares
* Includes any shares held by spouses or partners.
No Director has any other benefit or non-beneficial interest in the share capital of the Bank.
Principle 12: Corporate Social Responsibility
As a socially responsible institution, Bank of Valletta seeks to manage its banking activities with integrity and hold itself accountable
to its stakeholders in relation to issues concerning sustainability, the environment and other ethical concerns.
Bank of Valletta is committed to supporting the growth and prosperity of the community in which it operates by making strategic
investments and partnering with local organisations and charities and undertakes social initiatives. Similarly, BOV seeks to make a
difference in the quality of life through various initiatives, some of which are described below:
The BOV CSR Programme’s active participation as a citizen of the Maltese Community is based on 5 CSR Pillars:
• Environmental, Resource and Climate Sustainability;
• Education and Financial Literacy;
• Support to vulnerable members of society;
• Cultural Heritage & Environment Capital of the Maltese Islands; and
• Ethical and Responsible Behaviour.
Creating awareness about Environment, Social and Governance (ESG) was central to the Bank’s operations while reducing its carbon
footprint. Branches continued to be upgraded to reduce the impact on the environment and bicycle use was also promoted through
a collaboration with bicycle advocacy group ROTA. The Dinja Waħda project in collaboration with Birdlife Malta focused on increasing
the appreciation of the environment and ways to safeguard it among schoolchildren through a practical and fun approach.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
29
The Bank supported major educational awards with the University of Malta, including the Dean’s List, the Prize in Medicine and the
Foundation for Social Wellness Awards while continuing to promote literacy from a very young age and promoting financial education
through collaborations with the Malta Bankers’ Association and Ġemma.
A study on child abuse in collaboration with the University of Malta yielded valuable information on this sensitive topic. The state-of-
the-art St Michael’s Hospice, that the Bank is supporting through a collaboration with Hospice Malta, is expected to be inaugurated
in 2024. The L-Istrina BOV Piggy Bank Campaign continued to create awareness about solidarity from a young age and the BOV
Volleyball Marathon raised funds for id-Dar tal-Providenza. The Bank also extended its support to major philanthropic organisations
such as Caritas (Malta), the Richmond Foundation and the Malta Trust Foundation, among others.
The Bank extended its support to gifted children in the artistic and academical spheres through collaborations with the BOV Joseph
Calleja Foundation and the Julian’s Pathfinder Foundation.
The long term support of the restoration project of the Gran Salon yielded part of the original decorations dating back to the 17th
Century. A number of restoration projects, including an 18th Century Crucifix, and various restoration projects underway. The Bank
continued to support the major Heritage Trusts in Malta, such as Fondazzjoni Wirt Artna, Fondazzjoni Patrimonju Malti and Din l-Art
Ħelwa.
The Bank collaborated with the Manoel Theatre and the Teatru Astra and Teatru Aurora in Gozo in the production of three (3) high
calibre operas, while introducing youths to theatre productions through the support of TOI.
The Bank continued to retain its position as the major supporter of sporting initiatives in Malta stemming from the belief of the positive
physical and mental benefits of sports, both for the direct and also indirect participants. Besides the major sporting organisations that
are now synonymous with the Bank, such as the Malta Football Association, the Aquatic Sports Association of Malta and the Malta
Basketball Association, the Bank struck a number of new collaborations that include Bowling, Netball and Handball.
Further details about how the Bank is continuing to play a leading role in the communities in which it operates, and the actions taken
to bring about real change in our society can be found in the Corporate Social Responsibility section of this publication.
C. NON-COMPLIANCE WITH THE CODE
Principle 9 (Code Provision 9.2, 9.3 and 9.4)
Code Provision 9.2 provides that minority shareholders should be able to call special meetings on matters of importance to the
company. However, a minimum threshold of share ownership, as established in the Memorandum or Articles of Association of the
company, should be set up before a Group or an individual may call a special meeting. The Bank does not have such a threshold
included in its Memorandum or Articles. Nevertheless, as required in terms of the Capital Markets Rules, shareholders holding not less
than five percent (5%) of the voting issued share capital of the Bank may request the Bank to include items on the agenda of a general
meeting, of the Bank and to table draft resolutions for items included in the agenda of such general meeting.
Code Provision 9.3 requires the Bank to have in place a mechanism to resolve conflicts between minority shareholders and controlling
shareholders. Even though the Bank does not have such a mechanism in place, the Bank maintains an open dialogue with all its
Qualifying and Non-Qualifying shareholders to ensure no such conflicts arise.
Code Provision 9.4 requires that minority shareholders should be allowed to formally present an issue to the Board of Directors.
Although the Bank does not have a policy in terms of this Code Provision, the Bank maintains an open dialogue with the Malta
Association of Small Shareholders.
These Code Provisions were not applicable to the Bank during the financial year.
D. INTERNAL CONTROL
Authority to manage the activities of the Bank is delegated to the CEO within the limits set by the Board.
The Board is ultimately responsible for the Bank’s systems of internal control and for reviewing their effectiveness. Such systems
are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable as
opposed to absolute assurance against material misstatement or loss. Through the Audit Committee, the Risk Committee and the
Compliance and Anti-Financial Crime Committee, the Board reviews the process and procedures to ensure the effectiveness of the
Group’s systems of internal control, which are monitored by the Group Internal Audit Department.
The key features of the Group’s systems of internal control are as follows:
Organisation
The Group operates through the Board of Directors of subsidiary companies and equity-accounted investee companies with clear
reporting lines and delegation of powers.
Corporate Governance Statement of Compliance (continued)
Bank of Valletta p.l.c.
Annual Report 2023
30
Control Environment
The Group is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations.
Group policies and employee procedures are in place for the reporting and resolution of fraudulent activities. The Group has an
appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Group
objectives.
Risk Identification
The Management of each of the Group members is responsible for the identification and evaluation of key risks applicable to their
areas of business. The risk management model adopted by BOV is the classic “three lines of defence model”, wherein, the first line
of defence is constituted by the functions that own and manage risks, namely the business units; the second line is constituted by
the functions that oversee risks, namely Risk Management, Compliance and Anti-Financial Crime; and the third line is constituted by
Internal Audit, which is the function that provides independent assurance. The Risk Management function, within the second line
of defence, falls under the responsibility of the Chief Risk Officer, and operates within a wider Bank structure that reflects the risk
appetite and risk management philosophy articulated by the Board of Directors.
Reporting
Functional, operating and financial reporting standards are applicable to all entities of the Group. These are supplemented by operating
standards set, as required, by the Bank’s Board and the Executive Committee. Systems and procedures are in place to identify, control
and to report on the major risks including credit risk, changes in the market prices of financial instruments, liquidity, operational error
and fraud. Exposure to these risks is monitored by ALCO and by the Risk Committee. The Board receives periodic management
information giving comprehensive analysis of financial and business performance including variances against budgets.
E. CAPITAL MARKETS RULE 5.97.5
Whilst Capital Markets Rule 5.97.5 is not applicable, the information relating to the shareholder register required by this Capital
Markets Rule is found in the Directors’ Report.
F. GENERAL MEETINGS
The general meeting is the highest decision-making body of the Bank. A general meeting is called by twenty-one (21) days’ notice, and
it is conducted in accordance with the Articles of Association of the Bank.
The AGM deals with what is termed as “ordinary business”, namely, the receiving or adoption of the annual financial statements,
the declaration of a dividend, if any, the appointment of the auditors, Board authorisation to fix the auditors’ emoluments and the
election of Directors. Other business which may be transacted at a general meeting (including at the AGM) will be dealt with as special
business.
All shareholders registered in the Shareholders’ Register on the Record Date as defined in the Capital Markets Rules have the right to
attend, participate and vote in the general meeting. A shareholder or shareholders holding not less than five percent (5%) in nominal
value of all the shares entitled to vote at the general meeting may request the Bank to include items on the agenda of a general
meeting and/or table draft resolutions for items included in the agenda of a general meeting. Such requests are to be received by the
Bank at least forty-six (46) days before the date set for the relative general meeting.
A shareholder who cannot participate in the general meeting can appoint a proxy by written or electronic notification to the Bank.
Every shareholder represented in person or by proxy is entitled to ask questions which are pertinent and related to items on the
agenda of the general meeting and to have such questions answered by the Directors or by such persons as the Directors may
delegate for that purpose.
Remuneration report as at 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
31
Report of the Nominations and Remuneration Committee as at 31 December 2023
1. Terms of Reference and Membership of the Nominations and Remuneration Committee
The Nominations and Remuneration Committee (the Committee) works under the guidance of its Terms of Reference as approved
by the Board of Directors. The Committee is responsible to propose Board candidates and assess Board performance, recommend
changes where necessary, and assess adequacy of individual Board Members periodically. It is also responsible to ensure that
succession is in place for the Executive Committee and key functions of the Group, reviews periodically the Board policy for selection
and appointment of ExCo members and Key Function Holders, and to nominate suitable candidates for these positions and those of
Senior Management.
The Committee is also charged with overseeing the development and implementation of the remuneration and related policies of
the Group. It makes recommendations to the Board of Directors on the Remuneration Policy of the Group, supports the Board of
Directors in overseeing the remuneration system’s design and operation and ensure that remuneration is appropriate and consistent
with the Bank’s culture, long term business and risk appetite, performance and control environment as well as with any legal or
regulatory requirements. The role of the Committee is to devise the appropriate remuneration packages needed to attract, retain and
motivate Directors, as well as Key Function Holders required for the proper governance of the Group.
The Committee was co-chaired by Gordon Cordina and Antonio Piras between 01 January 2023 and 16 February 2023, after which
the Committee was solely chaired by Gordon Cordina. Kevin J Borg and Diane Bugeja were members of the Committee. Kevin
J Borg was a member throughout the full year (1 January to 31 December 2023), however in the case of Diane Bugeja, she was
appointed member of the Committee on the 16 February 2023, instead of Antonio Piras. All Committee members are Independent
Non-Executive Directors. The Chief Executive Officer attends meetings of the Committee. The Chief People and Culture Officer
attends meetings of the Committee by invitation. None of the Executives participated in the discussion regarding their remuneration.
The Company Secretary acts as secretary to the Committee.
2. Meetings
The Committee held twelve (12) meetings during the period under review. Gordon Cordina and Kevin J Borg attended all twelve (12)
meetings. Antonio Piras attended 1 (out of 1) meeting, and Diane Bugeja attended 11 (out of 11) meetings.
3. Remuneration Statement
3.1 Bank of Valletta p.l.c. Remuneration Policy – Executive Management
The Board of Directors determines the framework of the overall remuneration policy for Executive Management based on
recommendations from the Committee. The Committee, on the recommendations of the Chief Executive Officer, then establishes
the individual remuneration arrangements of the Group’s Executive Management, namely the members of the Executive Committee.
The Remuneration Policy applies consistently to all employees within the Group. Its objective is to align employees’ remuneration
with the Group’s performance, business strategy and business models, risk appetite framework, values and long-term goals. The
overriding principle of the Remuneration Policy is that individual performance is evaluated according to both quantitative/financial
and qualitative/behavioural measures.
Further details about the Bank’s Remuneration Policy are found in the Pillar 3 disclosures which are published on the Bank’s website.
The Committee considers that the current Executive Management remuneration packages are based upon the appropriate local market
equivalents and are adequate for the responsibilities involved. The Committee is of the opinion that the remuneration packages are
such, as to enable the Bank to attract, retain and motivate executives having the appropriate skills and qualities, in order to ensure the
proper management of the organisation. Such packages should therefore be kept under constant review.
Hereinafter, for the purposes of this Remuneration Statement, references to “Senior Executives” shall mean the Chief Executive
Officer and the other members of the Executive Committee.
Senior Executives enjoy the health insurance arrangements and death in service benefits as all Bank employees. Senior Executives
are also entitled to the use of a company car. Certain members of the Executive Committee have a clause in their contract, wherein
should their contract be terminated without due reason, they may be eligible for monetary compensation.
The Chief Executive Officer’s remuneration is reviewed and approved by the Committee and by the Board of Directors. The Chief
Executive Officer is eligible for an annual bonus entitlement by reference to the attainment of pre-established objectives and targets
as laid down in the Chief Executive Officer’s contract of engagement or as may be determined by the Committee and by the Board
of Directors.
The Members of the Executive Committee are eligible for an annual bonus entitlement. The Members of the Executive Committee
are also eligible for an annual salary increase which is approved by the Committee.
The Committee is of the view that the amount of performance bonus paid out at all staff levels is not significant.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
32
No supplementary pension or other pension benefits are payable to the Senior Executives. Insofar as early retirement schemes
are concerned, the Senior Executives are subject to the schemes which are set out and defined in the Collective Agreement (for
Managerial and Clerical Grades) as may be applicable to employees from time to time.
The Bank officially launched its first workplace pension - BOV VOPS in October 2022, a Voluntary Occupational Pension Scheme
that falls under the second pillar. It is one of the initiatives spearheaded by the People and Culture function to strengthen employee
retention and engagement.
The salient features and benefits of BOV VOPS are the following:
• The Bank will match every employee’s contribution up to €2,400 in a given calendar year. This commitment is guaranteed for at
least five (5) years;
• The employee will be eligible for 25% tax rebate on his/her contributions (max €750 on €3,000), under Pillar 2 (Work Place
Pensions);
• Fringe Benefit Tax does not apply on BOV VOPS;
• Employees who have a workplace pension in place through their previous employer(s), are eligible to transfer their pot under
BOV VOPS.
The BOV VOPS is classified as a Defined Contribution Pension Scheme. To date, over 850 employees have enrolled in the scheme
and the total amount of defined contribution plan benefits paid by the Bank during 2023 in relation to the BOV VOPS is included in
Note 7 (Employee Compensation and Benefits) of the Financial Statements.
Non-Executive Directors (excluding any Non-Executive Directors who are also employees of the Bank) are not eligible to participate
in and to benefit from the BOV VOPS.
Total emoluments received by Senior Executives during FY2023 are reported under Section 3.3 within this Report, in terms of Code
Provisions 8.A.5.
Variable Remuneration of Senior Executives (Executive Committee)
The Variable Remuneration of Senior Executives is determined by the Nominations and Remuneration Committee. Early in 2023,
all Senior Executives were given Performance Objectives for the year which were approved by the Nominations and Remuneration
Committee. The Bank’s Risk function set out the performance metrics against which each Senior Executive was individually assessed.
There are the following core elements to each individual performance assessment:
1. Corporate Performance Rating
- Financial Performance;
- ESG (relating to the implementation the Bank’s ESG Plan for 2024 as part of its Strategy, meeting the relevant regulatory
requirements);
- Customer and Employee;
- Governance adherence.
2. Individual Performance Rating
Moreover, all Senior Executives are scored on a number of Leadership Behavioural traits such as accountability, decisiveness and
teamwork.
During Q1 2024, an assessment of the performance of the Senior Executives was carried out by the Chief Executive Officer and
approved by the Nominations and Remuneration Committee, and notified to the Board of Directors. All reviews were conducted by
the Chief Executive Officer. However, in the case of the Chief Risk Officer, Group Chief Internal Auditor and Group Chief Compliance
Officer, further discussions were held with the respective Committee Chairs.
Variable Remuneration of Chief Executive Officer
Information on the performance assessment and the variable remuneration of the Chief Executive Officer is reported in the Directors’
Remuneration Report, within this Annual Report in terms of Chapter 12 of the Capital Markets Rules.
3.2 Remuneration Policy – Directors
The Remuneration Policy for Directors was drawn up in accordance with Capital Markets Rules 12.26 and was approved during
the Bank’s Annual General Meeting. The maximum annual aggregate emoluments that may be paid to the Directors is approved by
shareholders at the General Meeting in terms of Article 33.1 of the Bank’s Articles of Association. The aggregate emoluments of all
Directors of €450,000 per annum, was fixed at an Extraordinary General Meeting held on 27 July 2017. This amount excludes the
salaries of Directors in the Bank’s employment.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
33
During FY2023, a base annual fee of €22,500 was paid to each Non-Executive Director and €82,000 was paid to the Chairman of
the Board. In addition to the base fee, Non-Executive Directors who are also appointed as members of one of the Board Committees
receive additional compensation. The additional remuneration paid depends on whether the Non-Executive Director is Chair or a
member of such Board Committee. During 2023, Non-Executive Directors who were appointed Chair of a Board Committee were
granted an annual €8,000 Committee fee whilst Non-Executive Directors who were appointed Members of a Board Committee
were granted an annual €5,000 Committee fee. Executive Directors are not entitled to any fees for sitting on the Bank’s Board of
Directors and for attending Board Committee meetings (as required). The total remuneration paid to Non-Executive Directors during
FY2023 complies with the Remuneration Policy for Directors. The remuneration granted to Non-Executive Directors contributes to
the long-term performance of the Bank in view that Non-Executive Directors contribute actively during Board and Board Committee
discussions, and prepare themselves well ahead of meetings. There is positive engagement and interaction amongst Non-Executive
Directors, as well as with the Bank’s management and employees, which is consistently observed also during training sessions which
are organised from time to time by the Bank specifically for Directors.
Service Contracts for Directors
Non-Executive Directors
The Non-Executive Directors have service contracts with the Bank, none of which provide for severance payments upon termination
of their respective directorship. In terms of the said service contracts as well as pursuant to the Remuneration Policy for Directors, the
Non-Executive Directors are entitled to certain benefits after the termination of their directorship, including discounts on products
and services offered by the Group. Service contracts regulate the term of office of Non-Executive Directors, referring specifically
to the concept of Rotation of Directors provided within the Memorandum and Articles of Association (as further explained under
Principle 3 of the Corporate Governance Statement of Compliance). Non-Executive Directors are not paid any benefits linked to the
termination of their office and they do not benefit from any pension or early retirement schemes by virtue of their office.
Executive Directors
The Chief Executive Officer is appointed as Executive Director, on an ex officio basis, by virtue of his role of Chief Executive Officer.
The second Executive Director on the Board is currently the Group Chief Compliance Officer, who has a term of office of three (3)
years and shall thereafter be eligible for reappointment.
On a non-contractual basis, both the Chief Executive Officer and the Group Chief Compliance Officer may be eligible to a retirement
gratuity of up to a three (3) times salary, subject to a prescribed level of service, by virtue of their being employees of the Bank.
Vacation of office of Directors shall be served in writing. Service contracts also provide for the Directors’ powers and duties vis-à-vis
the Bank and their obligation to dedicate sufficient time to carry out their responsibilities. Directors are obliged to avoid conflicts of
interest and shall take reasonable steps to keep the Bank’s matters confidential. Directors’ emoluments are designed to reflect the
time committed by Directors to the Bank’s affairs, including the different Board Committees of which Directors are members, and
their responsibilities on such Committees.
Share Options and Share-Incentive Schemes
None of the Non-Executive Directors, in the capacity as a Director of the Bank, is entitled to profit sharing, share options or pension
benefits. During 2023, there were no changes in the terms and conditions of existing share options occurring during the financial
year.
Pursuant to the Remuneration Policy for Directors, in the case of Executive Directors, subject to the de minimis rule, in order to align
the interests of Executive Directors with the long-term interests of shareholders, at least fifty percent (50%) of the annual variable pay
outcome will normally be paid out in ordinary shares of the Bank, with the balance normally be paid out in cash. For FY2023, given
that the de minimis exceptions permitted by relevant banking regulations applies for the variable pay granted to Anatoli Grech, the
variable pay awarded to Anatoli Grech shall be paid fully in cash and no part thereof will be deferred to a later year/s. In the case of
Kenneth Farrugia, 50% of his variable pay shall be awarded in cash, whereas the remaining 50% shall be awarded in BOV shares and
deferred over a five (5) year period.
In terms of non-cash benefits, Directors are entitled to health insurance. They are also entitled to a refund of out-of-pocket expenses.
In addition, the Executive Directors only are entitled to the use of a company car.
One of the Non-Executive Directors, as well as both the Executive Directors, are employees of the Bank and therefore also receive
remuneration by virtue of their employment.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
34
3.3 Code Provision 8.A.5
Senior Executives’ Emoluments (Executive Committee)
Fixed Remuneration
Group Directors’
Fees
Variable
Remuneration
Share Options VOPS Fringe Benefits
€2,065,554* €34,490** €335,891 None €20,600***
Non-cash benefits: health
insurance and refund of
out-of-pocket expenses:
€8,909
* This amount includes payments of €324,000 and €415,372 made to two (2) former Senior Executives in connection with the
termination of their activities during FY2023.
** This amount represents emoluments received by Senior Executives in relation to their directorships on the Bank’s subsidiary companies.
*** This amount represents contribution made by the Bank under the BOV Voluntary Occupation Pensions Scheme (VOPS) with respect
to those Senior Executives who have registered under the BOV VOPS.
Directors’ Fees (Non-Executive Directors and Executive Directors)*
Fixed Remuneration Group Directors Fees Variable Remuneration Share Options Fringe Benefits
€401,788 €18,009 None None
Non-cash benefits: health
insurance and refund of
out-of-pocket expenses:
€23,148
* In addition to the fees paid to Non-Executive Directors, this table also includes fees earned by Executive Directors in relation to their
directorships on the Bank’s subsidiary companies and their membership on Board Committees of the Bank’s subsidiary companies.
Directors’ Remuneration Report in terms of Chapter 12 of the Capital Markets Rules
The Remuneration Policy for Directors (the “Policy”) regulates the remuneration of the Non-Executive Directors as well as that of the
Executive Directors. The Nominations and Remuneration Committee is tasked with keeping the Policy under review and considers
whether it requires revision or updating in line with market demands in order to ensure that the Bank’s Board of Directors attracts and
retains, suitable members that provide the collective skills and experience required for the proper functioning of the Board. The Policy
shall be reviewed and any material amendments to the Policy shall be submitted to a vote by the general meeting before adoption,
and in any case at least every four (4) years.
The Remuneration Policy for Directors is available on the Bank’s website on https://www.bov.com/content/financial-reports.
There were no deviations from the procedure for the implementation of the Remuneration Policy for Directors.
Information in terms on Appendix 12.1 of the Capital Markets Rules
Executive Directors
The Executive Directors’ total remuneration as salaried employees is regulated pursuant to the Remuneration Policy for Directors, the
Bank’s Remuneration Policy and the Executive Director’s respective contract of engagement. The Bank’s policy is that the remuneration
of Executive Directors ought to reflect mainly their executive positions within the Bank. Such remuneration consists of a fixed salary,
variable remuneration and benefits as may be provided for in their employment contract with the Bank.
The Bank believes that a combination of fixed and variable remuneration aims to attract and retain suitable executives who have the
necessary competence, skills, qualities and experience to enable them to discharge their duties according to the highest standards.
The fixed remuneration component gives due consideration to the level of responsibility which such position entails, whereas the
variable component is subject to the performance assessment by the Nominations and Remuneration Committee. This assessment
may include risk adjusted performance indicators and shall be aligned with the strategic objectives and delivery value to shareholders.
Any variable component of Executive Director remuneration is subject to malus and clawback provisions which allow a reduction or
reversal of any variable remuneration. The Nominations and Remuneration Committee may enforce such provisions up to seven (7)
years from the date of the performance assessment (which may be increased to ten (10) years if there is an on-going investigation)
in case of:
• (Malus only) material misstatement of the Bank’s financial results;
• (Malus only) material error;
• (Malus and clawback) circumstances warranting summary dismissal;
• (Malus and clawback) material failure of risk management;
• (Malus only) material downturn in economic activity.
During the period under review no malus and clawback provisions were exercised.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
35
Non-Independent Non-Executive Director by virtue of being salaried employee of the Bank
Besides being a Non-Executive Director on the Bank’s Board of Directors, James Grech holds an indefinite salaried office with the
Bank. However, James Grech is not considered to be an Executive Director because his position is not one of executive decision
making with the Bank, and he is appointed to the Board by shareholders in general meeting.
Kenneth Farrugia*
€
Anatoli Grech**
€
Miguel Borg***
€
James Grech
€
Fixed pay 275,515 55,750 43,233 71,754
Long service bonus N/A N/A N/A 2,990
Fringe benefits 11,415 3,832 1,174 5,014
VOPS 2,400 1,000 800 N/A
Allowance N/A N/A 5,410 N/A
BOV Directors’ fees N/A N/A N/A 25,000****
Other Group Companies directors’ fees 11,500 4,135 2,374 N/A
Final salary*** N/A N/A 265,372 N/A
Ex-gratia payment*** N/A N/A 150,000 N/A
Total Fixed Remuneration 300,830 64,717 468,363 104,758
Variable pay
-Cash 50,878* 16,089 N/A 4,981
-Value of Shares 50,878* N/A N/A N/A
Aggregate 402,586 80,806 468,363 109,739
Fixed vs Variable Pay Ratio (%) 75-25 80-20 100-0 95-5
* Kenneth Farrugia’s variable remuneration for FY2023 covers the period 12 October 2022, this being Mr Farrugia’s date of
appointment as Chief Executive Officer, till 31 December 2023. In the Remuneration Report for 2022, the reported variable
remuneration of Kenneth Farrugia was for his role of Chief Retail Banking Officer for the period 1 January to 11 October 2022.
** The remuneration (fixed and variable) including any other benefits, allowances and VOPS of Anatoli Grech is pro rata, with effect
from his appointment date as Executive Director on the Bank’s Board of Directors on the 1 August 2023.
*** The Final Salary and the Ex-Gratia payment represented a payment made to Miguel Borg in line with the contractual obligations in
his contract of employment as Chief Risk Officer and a negotiated settlement payment thereof.
**** Includes remuneration as member of the Digitalisation, Strategy and Transformation Group, a temporary group set up to advise the
Board on the Bank’s strategic implementation plan.
Shares and Share Options awarded in 2023
Share Value € Performance Period
Kenneth Farrugia
Vested Shares 50,878 12 October 2022 to 31 December 2023
Moreover, on the 6 June 2023, the Bank acquired 4,801 shares at €1.23 per share for a total of €5,910, in fulfilment of the shares
component of the deferred variable remuneration for FY 2022 of Miguel Borg.
In terms of the requirements within Appendix 12.1 of the Capital Markets Rules, the table hereunder represents the percentage
annual change of remuneration of the executive directors and non-independent non-executive director by virtue of his being a
salaried employee of the Bank, of the Bank’s performance, and of average remuneration on a full-time equivalent basis of the Bank’s
and Group’s employees (excluding directors) over the previous three (3) financial years.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
36
Performance Indicators
% Difference
2020 vs 2021
% Difference
2021 vs 2022
% Difference
2022 vs 2023
Annual Change of the Bank’s Performance based on Cost
to Income Ratio
8 percentage points (17) percentage
points
(17) percentage
points*
Annual Change of the Bank’s Performance based on Profit
Before Tax
2698% -18% 379%**
Annual Change of Remuneration for Rick Hunkin 2% -18% N/A
Annual Change of Remuneration for Kenneth Farrugia N/A N/A 424%
Annual Change of Remuneration for Miguel Borg 6% 19% 72%
Annual Change of Remuneration for James Grech 7% -6% 12%
Annual Change of Remuneration for Anatoli Grech N/A N/A N/A
Annual Change of the Average Remuneration of the Bank’s
employees, on a full-time equivalent basis
3.20% 5.31% 13.10%***
Annual Change of the Average Remuneration of the
Group’s employees, on a full-time equivalent basis
2.70% 4.89% 15.12%***
* The favourable change in cost to income ratio for FY2023 is due to a 74% increase in Interest income against an increase of 10% in
total costs.
** The Bank’s Profit Before Tax for FY2023 of €244.1m is driven by a full year of positive interest rate environment, stable operational
costs and free of major litigation costs and settlements. The Bank’s Profit before Tax for FY2022 was €50.9m.
*** The increase in average remuneration was computed after considering the total remuneration to employees (excluding Directors)
divided by full-time equivalent employees for Bank and Group for 2022 and 2023. For the purposes of this computation, total
remuneration paid to employees excluded Early Retirement Scheme lump sum payments and Voluntary Occupational Pension Scheme
payments to allow for a meaningful comparison.
Determining the Performance of the Executive Directors and of the Non-Independent Non-Executive Director by virtue of being
salaried employee of the Bank
The performance assessment of Kenneth Farrugia was based on the evaluation of the targets achieved against the objectives laid
down in his contract of engagement. These objectives are in line with the Bank’s overall targets, strategy, risk appetite framework and
long-term goals. These objectives together with their respective weighting are listed below:
Key Financial Performance Indicators 40%
ESG Objectives 20%
Regulatory Objectives 20%
Strategic Objectives 20%
As reported in the Remuneration Report of the previous year, during 2022 the performance assessment of Kenneth Farrugia was
undertaken for his role of Chief Retail Banking Officer, and accordingly covered the period 1 January 2022 until 11 October 2022.
Therefore, Kenneth Farrugia’s performance assessment for 2023 covered the period since his appointment as Chief Executive Officer
of the Bank on the 12 October 2022, until the 31 December 2023. The assessment of Kenneth Farrugia’s performance was carried
out by means of scores which Non-Executive Directors of the Board were invited to allocate to each of the KPIs specified in Kenneth
Farrugia’s contract. Upon the recommendation of the Nominations and Remuneration Committee, a final bonus payment of €101,756
was approved by the Board.
In accordance with the Remuneration Policy for Directors, the percentage of variable remuneration received by Kenneth Farrugia for
2023 was 25% of his fixed remuneration. As reported in the Remuneration Report of the previous year, Mr Farrugia’s variable pay for
2023 covered the period from his date of appointment as Chief Executive Officer on the 12 October 2022, until 31 December 2023.
Mr Farrugia’s percentage of variable remuneration is therefore lower than 100% of fixed remuneration threshold.
The performance and the variable remuneration of Kenneth Farrugia were reviewed and approved by the Nominations and
Remuneration Committee and by the Board of Directors.
The variable pay granted to Kenneth Farrugia for Financial Year 2023 shall be awarded 50% in cash, whereas the remaining 50% shall
be awarded in BOV shares and deferred over a 5 year period.
An assessment of the performance of Anatoli Grech was carried out by the Chief Executive Officer, following discussions with the
Chair of the Compliance and Anti-Financial Crime Committee, and approved by the Nominations and Remuneration Committee.
The Board was notified of the performance assessment of Anatoli Grech. The performance assessment of the role of the Group
Chief Compliance Officer, was based on a Corporate Performance element which includes four (4) core elements namely, financial
performance, ESG objectives, customer, employee and governance adherence and a individual performance targets. The targets are
designed to encourage sound and effective compliance risk management without compromising objectivity and independence.
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
37
The variable pay granted to Anatoli Grech for Financial Year 2023 shall be paid fully in cash. The amount of variable pay to be received
by Anatoli Grech amounts to approximately 20% of his fixed remuneration and is lower than the 100% of fixed pay threshold.
Given that the de minimis exceptions permitted by relevant banking regulations apply for the variable pay granted to Anatoli Grech for
FY2023, the bonus awarded to him shall be paid fully in cash and no part thereof will be deferred to a later year/s.
In the case of James Grech, the variable remuneration as a salaried employee of the Bank, is governed by the Remuneration Policy of
the Group. The Key Performance Indicators of Mr James Grech consisted of both team and individual objectives that in turn reflect
performance and behavioural competencies. The performance assessment of James Grech was carried out by the Chief Officer
Treasury to whom James Grech reports. The amount of variable pay to be received by James Grech amounts to approximately 5% of
his fixed remuneration and is lower than the 100% of fixed pay threshold.
No deferral requirements applied to James Grech during performance year 2023.
Non-Executive Directors
The maximum annual aggregate emoluments that may be paid to the Directors is approved by shareholders at the General Meeting
in terms of Article 33.1 of the Bank’s Articles of Association. The aggregate emoluments of all directors of €450,000 per annum,
was fixed at an Extraordinary General Meeting held on 27 July 2017. This amount excludes the salaries of Directors in the Bank’s
employment.
Information on annual emoluments paid to Non-Executive Directors is outlined in section 3.2 above.
Non-Executive Directors may receive various benefits as approved by the Nominations and Remuneration Committee. Currently, all
Non-Executive Directors are entitled to health insurance and to a reimbursement of out-of-pocket expenses incurred by them. As per
Bank’s Remuneration Policy for Directors, Non-Executive Directors are not eligible to participate in the annual bonus plan or pension
arrangement. In this regard, the ratio of Fixed vs Variable Pay for the Bank’s Non-Executive Directors is 100% - 0%.
Non-Executive
Directors’
fees and
benefits
FY2022 FY 2022
Total
2022
FY2023 FY2023
Total
2023
Percentage
Annual Change
of Aggregate
Emoluments
(2020 – 2021)
Percentage
Annual Change
of Aggregate
Emoluments
(2021 - 2022)
Percentage
Annual Change
of Aggregate
Emoluments
(2022 - 2023)
Fees
Fringe
Benefits
Fees
Fringe
Benefits
€ € € € € € % % %
Gordon Cordina
(Chairman)
101,501 1,444 102,945 105,411 2,593 108,004 -2% 14% 5%
Diane Bugeja 30,500 2,264 32,764 34,861 2,856 37,717 -2% 1% 15%
James Grech 25,000 1,611 26,611 25,000 2,014 27,014 10% 10% 2%
Alfred Lupi*
(resigned 25 May
2023)
35,500 3,191 38,691 14,127 1,482 15,609 -38% 12% 2%
Alfred Mifsud*
(resigned 27 April
2023)
35,500 4,072 39,572 11,501 1,558 13,059 -3% 16% 3%
Anita Mangion 36,523 2,352 38,875 35,000 2,700 37,700 13% 39% -3%
Antonio Piras*
(resigned 25 May
2023)
34,000 - 34,000 11,829 - 11,829 -3% 19% -12%
Elizabeth
Camilleri
32,500 - 32,500 32,500 - 32,500 n/a 20% 0%
Godfrey Swain 32,500 2,029 34,529 32,500 2,356 34,856 n/a 35% 1%
Kevin J. Borg 27,500 2,571 30,071 27,500 2,974 30,474 n/a 16% 1%
Deborah
Schembri**
(appointed 2
June 2022)
14,018 1,274 15,292 36,679 2,752 39,431 n/a n/a 50%
Nicola Angeli***
(appointed 1
August 2023)
- - - 16,538 - 16,538 n/a n/a n/a
Robert Suban***
(appointed 25
May 2023)
- - - 18,342 1,863 20,205 n/a n/a n/a
Total 405,042 20,808 425,850 401,788 23,148 424,936
Remuneration report as at 31 December 2023 (continued)
Bank of Valletta p.l.c.
Annual Report 2023
38
* Percentage annual change of aggregate emoluments (2022-2023) was based on annualised remuneration for 2023. Antonio Piras
and Alfred Lupi resigned from Directors of the Bank on 25 May 2023. Alfred Mifsud resigned from Director of the Bank on the 27 April
2023. Therefore, directors’ remuneration for 2023 was paid pro rata until date of resignation.
** Percentage annual change of aggregate emoluments (2022-2023) was based on annualised remuneration for 2023. Deborah
Schembri was appointed on the Board on 2 June 2022. Therefore, Directors’ remuneration for 2022 was paid pro rata as from date
of appointment.
*** Robert Suban and Nicola Angeli were appointed Directors on the Board of Directors during the Bank’s Annual General Meeting held on
the 25 May 2023. Mr Angeli’s appointment was subject to regulatory approval which was subsequently received on 1 August 2023.
The Directors’ remuneration takes into consideration the Board members’ required competencies, skills, effort and scope of the Board
work. It is intended to ensure that the Bank can attract and retain high-quality people, enabling the Bank to execute its business
strategy and serve its long-term interests, including its sustainability goals.
The Bank has complied in full with the procedure for the implementation of the Remuneration Policy for Directors as defined in
Chapter 12 of the Capital Markets Rules.
The Directors’ Remuneration Report for 2022 was approved at the Annual General Meeting held on 25 May 2023, by show of hands.
There were no issues raised on the Report during the said Annual General Meeting.
The Directors’ Remuneration Report in terms of Chapter 12 of the Capital Markets Rules is being put forward to an advisory vote during the
2023 Annual General Meeting pursuant to the requirements of Capital Markets Rule 12.26L.
In accordance with Capital Markets Rule 12.26N, the External Auditors have checked that all information, as required in terms of Appendix
12.1 of Chapter 12 of the Capital Markets Rules, has been included in the Directors’ Remuneration Report within this Remuneration Report.
Bank of Valletta p.l.c.
Annual Report 2023
39
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Assurance Report
To the Shareholders of Bank of Valletta p.l.c.
Report required by Capital Markets Rules 5.98 and 12.26N issued by the Malta Financial Services
Authority (the “MFSA”)
We were engaged by the Directors of Bank of Valletta p.l.c. (the “Bank”) to report on the disclosures of
specific elements in the Corporate Governance Statement and the Remuneration Report (the “Disclosures”)
as at 31 December 2023, in the form of an independent reasonable assurance conclusion, as to whether
they are, in all material respects, in compliance with the corporate governance regulations and information
to be provided in the Remuneration Report set out in the Capital Markets Rules issued by the MFSA (the
“Capital Market Rules”). More specifically, we are required to report on the Disclosures in the form of an
independent reasonable assurance conclusion about whether:
(a) in light of our knowledge and understanding of the Bank and its environment obtained in the course of
the statutory audit, we have identified material misstatements with respect to the information referred to
in Capital Markets Rules 5.97.4 (dealing with the Bank’s internal control and risk management systems
in relation to the financial reporting process) and 5.97.5 (where a takeover bid applies). Where material
misstatements are identified in relation to those requirements, we shall, in addition to our conclusion,
provide an indication of the nature of such misstatements;
(b) the Disclosures include the other information required by Capital Markets Rule 5.97, insofar as it is
applicable to the Bank; and
(c) the Disclosures include the information required by Appendix 12.1, ‘Information to be provided in the
Remuneration Report’, to Chapter 12 of the Capital Markets Rules (as applicable).
Responsibilities of the Directors
The Directors are responsible for preparing and presenting the Disclosures that are free from material
misstatement in accordance with the requirements of the Capital Market Rules and for the information
contained therein.
This responsibility includes designing, implementing and maintaining internal control as they determine is
necessary to enable the preparation and presentation of the Disclosures that are free from misstatement,
whether due to fraud or error.
The Directors are also responsible for preventing and detecting fraud and for identifying and ensuring that
the Bank complies with laws and regulations applicable to its activities. The Directors are responsible for
ensuring that personnel involved in the preparation and presentation of the Disclosures are properly trained,
systems are properly updated and that any changes in reporting relevant to the Disclosures encompass all
significant business units.
Bank of Valletta p.l.c.
Annual Report 2023
40
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Assurance Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Our Responsibilities
Our responsibility is to examine the Disclosures prepared by the Bank and to report thereon in the form of
an independent reasonable assurance conclusion based on the evidence obtained. We conducted our
engagement in accordance with International Standard on Assurance Engagements 3000
(Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (“ISAE
3000”) issued by the International Auditing and Assurance Standards Board. That standard requires that we
plan and perform our procedures to obtain reasonable assurance about whether the Disclosures are properly
prepared and presented, in all material respects, in accordance with the requirements set out in the relevant
Capital Markets Rules.
The firm applies International Standard on Quality Management 1, which requires the firm to design,
implement and operate a system of quality management including policies or procedures regarding
compliance with ethical requirements, professional standards and applicable legal and regulatory
requirements.
We have complied with the independence and other ethical requirements of the International Ethics
Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code), together with the ethical requirements that are
relevant to our assurance engagement in accordance with the Accountancy Profession (Code of Ethics for
Warrant Holders) Directive issued in terms of the Accountancy Profession Act (Chapter 281, Laws of Malta),
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA
Code. The IESBA Code is founded on fundamental principles of integrity, objectivity, professional
competence and due care, confidentiality and professional behavior.
The procedures selected and our determination of the nature, timing and extent of those procedures, will
depend on our judgment, including the assessment of the risks of material misstatement of the preparation
and presentation of the Disclosures whether due to fraud or error.
In making those risk assessments, we have considered internal control relevant to the preparation and
presentation of the Disclosures in order to design assurance procedures that are appropriate in the
circumstances, but not for the purposes of expressing a conclusion as to the effectiveness of the Bank’s
internal control over the preparation and presentation of the Disclosures.
Reasonable assurance is less than
absolute assurance.
Bank of Valletta p.l.c.
Annual Report 2023
41
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Assurance Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Our Responsibilities (continued)
We are not required to, and we do not, consider whether the Directors’ statements on internal control and
risk management systems cover all the risks and controls in relation to the financial reporting process or form
an opinion on the effectiveness of the Bank’s corporate governance procedures or its risks and control
procedures, nor on the ability of the Bank to continue in operational existence. Our opinion in relation to the
disclosures pursuant to Capital Markets Rules 5.97.4 and 5.97.5 (as appropriate) is based solely on our
knowledge and understanding of the Bank and its environment obtained in forming our opinion on the audit
of the financial statements.
As part of this engagement, we have not performed any procedures by way of audit, review or verification of
the Disclosures nor of the underlying records or other sources from which the Disclosures were extracted.
Other Information
We also read the other information included in the Annual Report that contains the Disclosures, and our
report thereon, in order to identify material inconsistencies, if any, with the Disclosures. We have nothing to
report in this regard.
Conclusion
Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
Bank of Valletta p.l.c.
Annual Report 2023
42
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Assurance Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Conclusion (continued)
In our opinion:
(a) in light of our knowledge and understanding of the Bank and its environment obtained in the course of
the statutory audit, we have not identified material misstatements with respect to the information
requirements referred to in Capital Markets Rules 5.97.4 and 5.97.5;
(b) the Disclosures include the other information required by Capital Markets Rule 5.97; and,
(c) the Disclosures include the information required by Appendix 12.1 to Chapter 12 of the Capital Markets
Rules.
The Principal authorised to sign on behalf of KPMG on the work resulting in this assurance report is Claude
Ellul.
KPMG 27 March 2024
Registered Auditors
92
Marina Street,
Pietà PTA 9044,
Malta
Environmental Social and Governance (ESG)
Risk Management and Disclosures
Bank of Valletta p.l.c.
Annual Report 2023
43
Addressing the pressing and intricate issue of climate change is not only a challenge for Malta but a global imperative. It demands
a fundamental transformation to ensure that society does not contribute further to the accumulation of greenhouse gases in the
atmosphere. The financial sector plays a pivotal role in assisting the economy in achieving this objective. Bank of Valletta is firmly
grounded in how it evaluates and manages exposure to Climate-related and Environmental (C&E) related risks, as elaborated in various
sections of this report.
1.1 BOV ESG Strategy
BOV’s steadfast dedication to sustainability is at the core of the Bank’s ESG strategy. In the preceding years, the Bank’s strategy
evolved and required adaptability in response to market shifts, technological advancements, regulatory changes, and geopolitical
developments influencing the trajectory and timing of the transition to a low-carbon economy.
The Bank’s core beliefs across Environmental, Social and Governance (ESG) are as follows:
Environment: As a prominent financial institution in Malta, BOV strategically prioritizes leading the transition to a low-carbon
economy by offering sustainable financing. The Bank is dedicated to enhancing its operational capabilities to provide increased value
to customers.
Social: On the social front, the Bank is dedicated to empowering financial literacy and providing support to vulnerable segments of
society. Additionally, BOV remains committed to preserving and celebrating the unique cultural heritage and environmental assets of
the Maltese Islands.
Governance: In terms of governance, the Bank’s focus is on raising awareness and fostering positive action across all levels of the
organization regarding ethical and fair conduct. BOV is also determined to accelerate the simplification, accessibility, and digitalization
of all banking activities, aligning them with positive ESG outcomes.
As a prominent financial institution in Malta, BOV dedicated its efforts in 2023 to advance the shift towards a low-carbon economy
through its operations and by providing sustainable financing options through loans and advances to both retail and business customers.
In 2023, the Bank provided support to clients across all sectors, acknowledging that the path to greener practices was heterogenous
across sectors, with some facing more substantial challenges to transition. BOV recognize that this could serve as a lever to encourage
transition amongst the Bank’s value chain. Furthermore, the Bank actively worked to enhance its business capabilities, emphasizing
a strong commitment to responsible banking, whilst recognizing the importance of considering consumer preferences, particularly
regarding green financing solutions. The Bank kept its policies, targets, and progress under constant review, considering the rapidly
changing external environment and its commitment to aiding its clients achieve their sustainability goals.
Concurrently, BOV is deeply committed to fostering an inclusive and healthy society. By prioritizing the well-being of colleagues,
customers, and communities, the Bank believes it could deliver higher and more sustainable returns for investors, while concurrently
meeting the diverse needs of stakeholders and fulfilling the interests of shareholders. Recognizing that progress may vary, the Bank
remains prepared to adapt its approach to maximize the effectiveness and impact of its support.
1.1.1 Incorporation of ESG in the Bank’s Strategy 2024-2026
Throughout the year under review, the Bank effectively executed its commitment to uphold core values of integrity, sustainability,
and social responsibility by seamlessly integrating the ESG strategy into its short and medium business plans extending to 2026. In
the environmental domain, notable accomplishments included enhancing climate mitigation within internal operations through its
decarbonisation strategy, promoting a significant shift towards eco-friendly loans, and actively encouraging environmentally conscious
behaviours among clients.
1.2 Governance
The oversight and management of sustainability concerns are fundamental elements within the Bank’s governance framework,
and they are seamlessly integrated into the Bank’s standard operational structures. This includes the flow of information to several
executive and management committees, each of which is an essential component of the Bank’s formal governance system.
The governance structure of the Bank encompasses the Board, Executive Committees, and Management Committees, spanning both
business and compliance divisions.
The Board and senior management are acutely cognizant of the risks associated with ESG, diligently supervising the frameworks,
and ensuring their efficient implementation, addressing not only the technical aspects of C&E risks but also regulatory aspects. The
primary purpose of the ESG-related committees is to supervise and contribute to the Bank’s control framework. Each committee
operates under specific terms of reference, outlining its responsibilities, decision-making authority, and the process for escalating
significant issues.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
44
1.2.1 Board of Directors
Serving as the ultimate decision-making authority, the Board made crucial determinations on matters of paramount significance,
encompassing strategy, finances, and regulations. In the course of 2023, the Board received regular updates on ESG matters, with
a heightened emphasis on C&E risks. These updates were provided by both the ESG Committee and the ESG Management Forum.
1.2.2 ESG Committee
The ESG Committee plays a pivotal role in providing board-level oversight to monitor strategic C&E risks, contributing significantly
to the enhancement of the governance structure across various ESG aspects. Under the leadership of the Bank’s Chairman, the
committee comprised three Non-Executive Directors and representatives from diverse organizational areas.
Throughout the year, the ESG Committee actively engaged in deliberations and presented reports on several key initiatives. On
a quarterly basis, it was presented a dynamic sustainability dashboard, serving as an all-encompassing platform. This tool offers a
detailed overview of the Bank’s performance in addressing C&E risks, alongside its social responsibility initiatives. It is a testament
to the Bank’s commitment to transparency whilst adopting proactive measures to navigate and mitigate these challenges effectively.
Instrumental for stakeholders, the sustainability dashboard provides insights into the Bank’s steadfast commitment to environmental
and social sustainability. It features data on carbon emissions reduction efforts and incorporates a real-time monitoring system based
on the Risk Appetite Framework (RAF) Key Risk Indicators (KRIs). This system ensures a continuous assessment of the Bank’s risk
management strategies, aligning them with sustainability goals. Through the dashboard, the Bank not only demonstrates a proactive
approach to addressing ESG concerns but also underscores its dedication to transparency, responsible governance, and sustainable
banking practices.
Further, the Bank’s Group Internal Audit presented to the ESG committee a thorough a valuable overview of the implementation of
C&E practices across the Bank. Its analysis was focused on four key aspects of the Bank’s ESG efforts. These included the progression
of ESG initiatives and actions, the evolution of the ESG Strategy, especially concerning C&E Risks, the alignment with ECB expectations
in process development, and the establishment of a robust governance framework supporting these processes. This comprehensive
evaluation provided valuable insights into the Bank’s commitment to advancing ESG principles and ensuring alignment with industry
expectations.
Also, the Committee delved into the Bank’s examination of the EBA’s roadmap on ESG risks and sustainable finance, the integration
of C&E risks into the credit underwriting framework, international and local environmental scanning, and research, as well as the
formulation of the Bank’s policies related to sustainability. This multifaceted approach underscores the Bank’s commitment to thorough
examination and proactive management of ESG considerations.
1.2.3 ESG Management Forum
In essence, the Bank’s ESG Forum served as a comprehensive platform for strategic discourse, aligning the Bank’s operations
with regulatory frameworks, advancing its sustainability agenda, and fostering a proactive approach to environmental and social
considerations within its business landscape. The ESG Management Forum serves as the catalyst for initiating discussions that
later undergo careful deliberation by the ESG Committee and the Board. The Forum, which is led by the Bank’s Head of the ESG
department, engages with stakeholders from across the organization whilst ensuring active and inclusive participation in shaping the
Bank’s approach to ESG matters.
In the dynamic landscape of 2023, the Bank’s ESG Forum emerged as a pivotal platform for comprehensive discussions on a myriad
of crucial matters. The forum diligently delved into significant topics which were common elements to the ESG committee, such
as the sustainability dashboard and internal audit analysis. Further, it discussed the implementation of regulations through projects
such as CSRD and Pillar 3 Disclosures and meticulously examined the contents of the Bank’s regulatory communication, scrutinizing
the supervisory landscape, ensuring that the Bank’s strategic initiatives were in harmony with their expectations. These discussions
underscored the Forum’s commitment to robust risk management and regulatory compliance. Other agenda items included operational
and risk management practices implemented such those related to lending (C&E customer questionnaires and onboarding procedures),
policies and procedures and the Bank’s progress on its decarbonization pathway. The latter showcase the strategic commitment to
reducing carbon footprint and aligning with broader sustainability objectives.
1.2.4 Decarbonisation Working Group
During the year under review, the Bank instituted the Decarbonisation Working Group (DWG) as a proactive force to lead initiatives
targeting emission reduction, energy efficiency, and the advocacy for renewable energy. The DWG adopted a comprehensive approach,
incorporating strategic goal setting, stakeholder engagement, progress monitoring, collaborative endeavours, and educational
programs. The working group strategically delineated initiatives spanning various Bank’s domains, mainly addressing scope 1, 2, and
3 within the GHG Protocol categories. It also focused on introducing measures within various departments of the Bank. In navigating
this expansive scope, the DWG emerged as a pivotal driving force, steering the Bank towards an environmentally conscious and
sustainable future.
1.2.5 ESG Department
The ESG Department assumes a pivotal role as the overseeing arm within the Risk Department, entrusted with the explicit vision of
ensuring the meticulous execution of climate, environmental and social risk implementation across the organisation. In aligning with
financial regulators and other pertinent regulations, the Unit has crystallized its mission to guarantee compliance and excellence in
addressing the ESG criteria.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
45
At the forefront of advocacy, the ESG Department champions the infusion of ESG factors, emphasizing C&E risks across the entire
spectrum of the Bank’s activities. This proactive approach not only aligns with the broader sustainability vision but also ensures
the attainment of environmental and social objectives and milestones. In a strategic move to fortify its capabilities, during 2023
the Department has bolstered its resources with the addition of two senior analysts. This augmentation signifies a dedication to
maintaining a cutting-edge approach in navigating the evolving landscape of environmental and transitional concerns.
1.2.6 Continuity, Outsourcing & ESG Team
Under the purview of the Operational Chief Officer, the Bank has introduced a dedicated operational arm to proficiently manage and
streamline the aspects of its ESG initiatives. This strategic step underscores the Bank’s unwavering commitment to seamlessly infuse
sustainability into its day-to-day operations, ensuring the effective execution of ESG principles, solidifying the Bank’s commitment to
operationalizing sustainability considerations in tandem with its overarching vision. Functioning as a catalyst for transformation within
the Bank, this specialized unit concentrates on the practical implementation of sustainability principles. It takes charge of formulating
and executing strategies to instil a comprehensive understanding of ESG considerations throughout the Bank. This team adopts a
holistic approach, embedding ESG principles into the strategic fabric of the Bank’s operational activities.
This initiative not only underscores the Bank’s dedication to green sustainability principles but also manifests a proactive approach in
navigating the intricacies of sustainable banking. Importantly, the Continuity, Outsourcing & ESG team actively oversees the Bank’s
internal decarbonization journey, conducting weekly follow-ups with internal stakeholders. Furthermore, this team is also entrusted
with executing the operational facets of the ESG framework whilst ensuring coherence and alignment with broader organizational
objectives.
1.2.7 Building the Bank’s expertise in ESG
During 2023, the Bank’s non-executive directors underwent a specialized training program led by external experts, focusing on
ESG matters. This session aimed to address critical aspects, providing insights into the regulatory frameworks influencing the Bank’s
adherence to ESG principles. Emphasis was placed on the anticipated evolution of C&E regulations, with a particular focus on the
board’s pivotal role in steering this evolution which is directly impacting the Bank. This training initiative serves as a testament to the
Bank’s commitment to well-informed and proactive ESG governance, showcasing its dedication to aligning with evolving regulatory
standards.
Nonetheless, throughout 2023, other Bank employees directly involved with climate-related and environmental matters have
proactively immersed in international training opportunities, consistently enhancing their expertise in this area. This ongoing
investment in knowledge and skill development highlights the Bank’s unwavering commitment to advancing its environmental and
social responsibilities. Additionally, an internal risk training complemented these efforts, ensuring a holistic approach to enhancing the
Bank’s capabilities and resilience in the ever-evolving landscape of ESG compliance and risk management.
1.3 Risk Management
Throughout 2023, the Bank maintained its adherence to customary procedures and protocols for evaluating and communicating
material C&E risks. Additionally, efforts were made to introduce new measures or enhance existing ones, particularly in areas
concerning social and governance considerations.
BOV established an environmental scanning framework, incorporating research insights and business input. Notably, the Bank
considered the findings of KPMG’s published research on ‘Sustainability Preferences in Real Estate in Malta’ (January 2023), and a
more recent KPMG report highlighting the appetite of Maltese society for financing that enables green improvements to properties,
contingent on increased knowledge about such products. This valuable insight was shared with the relevant areas, particularly within
retail banking, to enhance awareness and inform decision-making processes. Moreover, the Bank analysed published research by
other international bodies such as ECB, NGFS and UNEP, which supported risk management decisions. Moreover, the Bank aims to
continue enhancing its horizon scanning to keep up to date with the latest ESG-related regulations.
1.3.1 Materiality Assessment
In 2022, the Bank adopted the risk terminology proposed by the Task Force on Climate-Related Financial Disclosures (TFCD) and
other sources such as ECB and the EU Commission for qualifying and quantifying the impact of C&E physical and transition risks on
the Bank. The assessment is designed for the specificities of Malta.
In its comprehensive materiality assessment, the Bank meticulously identified 23 transmission channels encompassing credit,
operational, reputational, strategic and liquidity risks, spanning both physical and transition risks. Among these channels, nineteen
were specifically attributed to either Physical or Transition risks, delineating their distinct impacts. However, an additional four
channels—corporate creditworthiness, retail creditworthiness, government creditworthiness, and revenue at risk—were found to be
common to both categories, underlining their pervasive influence across the spectrum of risk management. This meticulous delineation
underscores the Bank’s proactive approach in understanding and mitigating multifaceted risks within its operational framework.
Market risk is deemed immaterial given the absence of a trading book within the Bank. Nonetheless, the Bank’s future analysis
intends to analyse the impact of climate change on the Bank’s interest rate assets. Specifically, for each one of the transmission
channels, a tailored qualitative concentration analysis, sensitivity analysis and / or quantitative approach (qualitative scorecard) has
been developed to assess the materiality of the climate related and environmental risk impact on each business unit of the Bank. The
developed methodology is intended to ensure a systemic and consistent materiality assessment process on a yearly basis whilst doing
the necessary update and review to adjust to the most recent C&E data.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
46
Each transmission channel has also been assessed in terms of the time-horizon in which the risks would likely materialise within 2
years (short term), 2 to 5 years (medium term), or beyond 5 years (long term). The Bank expects that transition risk becomes material
in the short-medium term (less than 2 years, or between 2 to 5 years) whereas the physical risk and their impact is likely to occur in
the medium-long term (between 2 to 5 years or after).
Risk Type Transmission Channel
Physical
Risk
Transition
Risk
Time
Horizon
Credit Risk
Corporate creditworthiness
MT
Change in collateral values due to damages
MT
Retail creditworthiness
LT
Government creditworthiness
LT
Operational Risk
Lawsuits from NGOs/Activists
ST
Damage to branches and headquarters
MT
Staffing issues following a disaster
ST
Damages to power facilities
MT
Payment services disruptions
MT
Cloud services disruptions MT
Reputational Risk
C&E Clause in product offering
ST/MT
Accusation of green washing and green hushing
ST
Exposure to sectors with high environmental impact
ST
Failure to comply with C&E regulation
ST
Board members exposure to ESG adverse companies
LT
Liqudity Risk
HQLA devaluation
LT
Cost of funding
MT
Bank Run
LT
Strategic Risk Revenue at risk
ST/MT
Risk materiality levels are briefly set out below:
• Low risk: Low pressure from C&E risks, significant room to manage or adapt to risks in the short term.
• Moderate risk: Limited pressure from C&E risks drivers, room to manage or adapt to these risks in the medium term.
• High risk: Risk pressure is present or likely to crystallize soon, room to adjust to risk but requiring more material changes (e.g.,
changes in business model, new policies, passing cost to customers).
• Very high risk: Material pressure from environmental risk is already visible, limited room to adjust or adapt.
Credit risk:
• Corporate creditworthiness: For this assessment, the Bank developed an industry score (based on physical risk and transitional
risk) for the sectors being financed in its lending and proprietary portfolio. Data sources used are Moody’s, Fitch, S&P, UNEP-FI,
EU Taxonomy, EBA-CPRS and ECB. A conservative approach is adopted by an adjustment of Moody’s score by one notch in
the risk level when BOV’s portfolio specificities could expose it to higher risk than the industry average, such as the real estate
physical risk score. The Bank’s clients are mostly local real estate developers with operations concentrated in Malta. The impact
of physical risk on real estate in Malta is expected to be significant because Malta is facing significant land-use constraints which
could jeopardize or significantly constrain future real estate developments. Score adjustments were also performed in terms of
transition risk to the wholesale trade, physical risk to the wholesale trade, accommodation, and warehousing. The Bank has an
exposure of €1,349.64 million (47.03% of the NFC exposure, composed of loans and advances) which is dominantly exposed
to high physical risk whilst €1,514.90m million (52.79% of the NFC exposure, composed of loans and advances) which is
exposed to moderate C&E risks. Only 0.24% and 1.47% of the exposure is exposed to very high physical risk and transition risk
respectively. Furthermore, more than 50% of the NFC exposure is towards climate-sensitive sectors, i.e., operates in very high
(1.67%) and high-risk (55.35%) sectors. In 2023, the Bank has re-defined its limits towards the sectors which are considered as
very sensitive to C&E risks. Moreover, the Bank is monitoring the high-risk C&E sectors exposure concentration. The highest
exposure concentration is in the sector of accommodation (23.09%), followed by real estate activities (21.97%), wholesale trade
(12.41%) and energy sector (10.07%). As risk mitigation, the Bank during 2023 has started engagement with the corporates
which are deemed to be contributed to highest financed emissions whilst also distributing a questionnaire to identify physical or
transition risk concerns for the corporate. BOV has an exposure of 75.48% towards carbon-intensive sectors (published by ECB),
of which 1.98% of the exposure is green financing.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
47
• Real estate collaterals: The Bank utilized various sources to assess the collateral value (immovable property) in terms of physical
risk because of flood risk damages. However, the main source is the database of ThinkHazard, which examines the geographic
likelihood of risk in the upcoming 10 years. No significant devaluation of real estate collaterals expected given the limited share
of collaterals located in areas prone to flood. The Bank has 18.27% of its immovable collateralized property localized in high-risk
areas (4.97% RRE, 13.30% CRE).
• Retail creditworthiness: The approach adopted by BOV to measure the structural impact of C&E risks on employment in
Malta is based upon the Eurostat breakdown of Maltese employment by sector. The sector risk scores developed for corporate
creditworthiness were used to identify the share of employment in various sectoral risk levels. The approach assumes that the
Bank’s retail clients’ employment represents the Maltese economy. The assessment shows that it is unlikely that the Bank would
suffer from a material degradation of repayment capacity of retail customers caused by C&E risks drivers given the limited share
of Maltese employment in sectors exposed to high physical or transition risk, with almost no employment in very high climate
risk sensitive sectors.
• Government creditworthiness: Like the retail creditworthiness, the approach to assess the impact of C&E on the Maltese
economy is based upon Eurostat data. The Bank considers the breakdown of Maltese Gross Value Added (GVA) by sector applied
to sectorial scores. It is unlikely that the Bank would suffer from a material degradation of repayment capacity of the Republic of
Malta caused by C&E risks drivers given that limited reliance of the Maltese economy on sectors are expected to be materially
impacted, with almost no GVA from very high climate risk sensitive sectors.
Operational risk: Within the Bank’s operational framework, a thorough assessment of transition and predominantly physical risks
associated with its assets and operations is conducted. Climate and Environmental (C&E) risks are meticulously mapped to the
Bank’s operational risk taxonomy. This process entails scoring the materiality of these risks utilizing the current operational risk five-
point scale, considering both the severity of impact and probability dimensions. Notably, Climate and Environmental Risk events are
recognized as exerting a moderate impact on operational risks within this refined corporate context, thereby ensuring a comprehensive
understanding and management of these critical factors.
Reputational risk: Reputational risk management at the Bank involves a meticulous qualitative assessment, leveraging the Climate
and Environmental (C&E) risks taxonomy alongside press search analysis. Each identified risk event undergoes a thorough evaluation,
scrutinizing its potential impact and likelihood through the lens of the operational risk five-point scale, which delineates severity of
impact and probability dimensions. Noteworthy is the recognition that Climate and Environmental risk events typically entail a low
impact on reputational risks within this evaluative framework, ensuring a characterised understanding and effective mitigation of
these factors.
Liquidity risk: The Bank stressed its High-Quality Liquidity Assets (HQLA) to determine the impact on the LCR by physical and
transition risk. A climate disaster in Malta could damage the state infrastructure, reduce economic activity, and consequently reduce
the Maltese government’s bond value. The Bank adopted an approach to analyze the sectors in its portfolio to determine if a change
in market sentiment towards carbon-intensive assets following an introduction of climate-policy could lead to an abrupt repricing of
investments. The Bank further assessed liquidity risk from a C&E risks perspective considering a sharp increase in deposits withdrawal
and in credit line use due to a severe weather event. The low impact of C&E risks driver on liquidity risk is expected given the Bank’s
high liquidity position.
1.3.2 Policies
1.3.2.1 Risk Appetite Framework (RAF)
During 2023, the Bank re-defined its RAF KRIs in relation to sustainable finance targets towards retail and business green financing,
which also aligns to the targets of the Bank’s strategy 2024-2026. The Bank is actively bolstering sanctioned green financing, aspiring
to achieve a strategic increase for each in comparison to their respective sanctioned loans. Furthermore, the Bank’s strategic emphasis
on fostering global climate action is evident in the KRI to augment green bond holdings as a percentage of the total bond proprietary
portfolio. The Bank is committed to increase green financing towards corporates issuing green bonds that intensify climate change
mitigation and/or climate change adaptation.
Within the RAF, key risk indicators (KRIs) extend beyond traditional financial metrics to encompass social and governance concerns,
including but not limited to the gender pay gap and board gender diversity. Should any of these KRIs breach predefined limits, the
Bank has instituted an internal escalation protocol mandating further investigation and ratification. These objectives are meticulously
monitored through the Bank’s sustainability dashboard, underscoring their significance within the realm of area-specific policies.
Under the ESG realm the Bank has the following targets:
• Target of at least 5% green business loans as a share of the total business loan sanctioned during the year.
• The Bank aims to have at least 3% of the Treasury bond portfolio in Green Investments
• Percentage of the average gender diversity pay gap to be lower than 5%.
• The Bank aims to have at least 33% female representation in the Board of Directors
• Target of at least 5% green personal loans as a share of the total personal loans sanctioned during the year.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
48
1.3.2.2 C&E elements in the Bank’s Business Policies
The element of C&E risks management is also integrated in the Bank’s Treasury Management Policy (TMP) and Corporate Credit
Lending Policy. During 2023, both policies were reviewed to incorporate new targets and sustain monitoring practices. Policies contain
the Bank’s risk appetite towards very high-risk sectors financing (which excludes green financing); namely mining and quarrying,
manufacture of basic metals and manufacture of coke and petroleum products. The policies also include minimum requirements
for the automotive manufacturing sector. The Bank decided to only finance corporates which are reaching the emissions regulatory
targets as specified by EU.
Moreover, the Bank has incorporated a green loan definition (aligned with EU Taxonomy) into its Corporate Lending Policy, defining it
as a new business loan facility with a well-defined purpose and investment cost aimed at diminishing CO2 emissions.
Furthermore, BOV successfully integrated several key frontliners processes. Retail Banking initiated a process for the collection of
Energy Performance Certificates (EPCs), by conducting training sessions, issuing internal circulars, and updated its Consumer Finance
Home Loans Policy. Business Banking facilitated an interactive training session for front-line personnel regarding the EPC process and
updated the Corporate Credit Lending Policy. Additionally, Business Banking designed a customer onboarding flowchart to identify
high-risk sectors and customers, which was incorporated into internal procedures. Green financing procedures were implemented by
Business Banking and were also included in the Corporate Credit Lending Policy, while Treasury has set targets for green bonds and
integrated ESG ratings into credit evaluations. BOV established limits and criteria for financing very high-risk sectors and implemented
an exclusion policy in Wealth Management, Private Banking, and Investment Centres.
The Bank’s exclusion policy applies to any portfolio with direct investment in equities and/or bonds for which the Bank acts as
portfolio manager. The exclusion policy also applies to any investment advice given by financial advisors. Financial advisors are
prohibited from recommending investing in any entity present in the exclusion list.
Types of exclusions
In formulating the Exclusion Criteria, BOV has taken into account ESMA guidelines with respect to Paris-aligned Benchmarks in order
to inform the spirit of this policy. The Exclusion Criteria focus on excluding investment in any company that meets any one of the
following:
i. Involvement in activities related to controversial weapons.
ii. Involvement in activities related to tobacco.
iii. Deriving 5% or more of revenue from activities related to thermal coal.
iv. Deriving 50% or more of revenue from activities related to oil and gas production.
v. Deriving 5% or more of revenue from activities related to oil sand.
The above does not exclude the possibility of additional criteria from being imposed to take into account other Paris-aligned criteria
as data becomes more readily available. Data availability precludes exclusion based on separate oil fuels and gaseous fuel revenue
percentage figures. It also excludes exclusion based on revenues derived from electricity generation activities having a GHG intensity
of more than 100g CO2 e/kWHh.
Securities are screened on a quarterly basis. Companies are placed on the Exclusion list if they are found to violate any one of the
criteria (i) through (v) above. Companies in violation are removed from the Bank of Valletta’s recommended list within 3 months.
Portfolio Managers and/or Financial Advisors may appeal to reinclude an excluded company by appealing to the Wealth Management
Investment Committee. Any such appeal must be defended purely on Environmental, Social or Governance grounds. The Wealth
Management Investment Committee decides on whether to uphold or reject any such appeal by simple majority and all decisions are
final.
Overall, these measures underscore BOV’s commitment to robust risk management and responsible banking practice.
1.3.3 Credit Risk Management Practices
1.3.3.1 Credit Underwriting
During 2023, the Bank proactively fortified its scrutiny of C&E risks by seamlessly integrating climate risk assessments into its
credit risk management framework. A notable achievement within commercial banking was the successful implementation of initiative
designed to holistically evaluate the broader spectrum of C&E risks inherent in the corporate lending portfolio.
A pivotal aspect of this initiative involved the introduction of a sector-specific questionnaire meticulously crafted for clients operating
within six very-high and high-risk sectors (accommodation, power, real estate, transport, warehousing, and wholesale trade) crucial
to the Bank’s strategic interest. This strategic approach which has been initiated since July 2023 included the seamless integration
of client questionnaires with group facilities of over €5 million explicitly tailored for gauging C&E risks, into the credit annual review
process for sectors identified as high-risk. These questionnaires are systematically incorporated into the credit underwriting process.
In alignment with regulatory directives, the Bank is supporting its customers and assisting them to complete and forward these
climate questionnaires. This concerted effort not only reflects the Bank’s commitment to robust risk management practices but also
underscores its dedication to compliance with regulatory guidelines concerning C&E risks assessments.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
49
1.3.3.2 Customer Engagement
The Bank is taking proactive steps to meet with its top customers across various industries, actively addressing sustainability
challenges, identifying opportunities, and aiding in the formulation of transition strategies. Through collaborative dialogue with key
stakeholders, the Bank is advocating for sustainable practices and supporting the adoption of environmentally and socially responsible
business models among its clientele. These interactions serve as platforms for the exchange of ideas, sharing of best practices, and
the collaborative development of strategies that harmonize with both business objectives and overarching sustainability goals. This
proactive engagement demonstrates the Bank’s commitment to facilitating positive change and assisting its customers in navigating
their pathway toward a more sustainable future.
1.3.3.3 Financial Products
The Bank, with foresight and responsibility, positioned itself as a catalyst for positive change, bridging the financial landscape with the
burgeoning opportunities for sustainable development.
From a Retail standpoint, the Bank has consistently elevated its green product offerings. The BOV Eco personal loan extends highly
favourable terms to empower customers in financing environmentally conscious products and services. Notably, the loan caters to a
spectrum of eco-friendly assets, including hybrid cars, motorcycles, low CO2 emission motor vehicles, Class ‘A’ white goods, and even
facilitates the financing of eco-related grants. In alignment with its commitment to sustainability, the Bank’s BOV Eco personal loan
integrates specialized schemes, such as the Malta Chamber of SMEs Special Scheme and the Malta Developers Association Special
Scheme. These initiatives specifically assist customers in funding the acquisition of photovoltaic equipment and solar water heaters.
The Malta Chamber of SMEs scheme collaborates with GRTU-authorized retailers under the Photo Voltaic Purchase Facilitation
Scheme (PVPFS), while the MDA scheme involves retailers affiliated with the Malta Developers Association.
Furthermore, the Bank’s remains committed to social responsibility through its comprehensive suite of retail products tailored for
students, graduates, individuals with disabilities, and employed customers aspiring to advance their education. This holistic approach
underscores the Bank’s dedication to fostering green practices and addressing diverse social needs through its retail portfolio.
From a Business Banking perspective, the Bank offers a preferential interest rate within its pricing model for green property loans,
whereby the loan is backed with a Bank approved Building Certification. Moreover, the Bank also offers the green discount on loans
which contribute towards a decline in CO2 emissions, but do not fall under the green property loan category. These loans must
be backed by a certified Engineer’s report or verified by the Bank. Preferential interest rates are also applied for certain social and
governance criteria, as specified by the Bank.
Going forward the Bank aims to enhance its green product offerings, reflecting its KPIs for retail and business green products, as part
of the RAF’s KPIs (refer to Section 1.3.2.1).
1.3.3.3 The Bank’s internal climate stress test model
The internal climate stress test model is based on an econometric model deemed as a good practice by the ECB in their reports. The
climate stress test model covers different climate scenarios both for the physical and the transition risks. The scenarios are aligned
with the ECB’s methodologies and takes into consideration the three scenarios that include an orderly transition, disorderly transition,
or hothouse world.
1.4 ESG Metrics and Targets
1.4.1 BOV’s Greenhouse Gases (GHG) Emissions
The GHG Protocol Corporate Accounting and Reporting Standard provides requirements and guidance for companies and other
organizations preparing a corporate-level GHG emissions inventory. GHG Protocol categorizes all corporate emissions under three
scopes, scope 1, 2 and 3.
Scope 1 relates to the direct emissions resulted from the operation, activities and processes (e.g. gas and transport fuels). Scope 2
relates to the indirect emissions derived from electricity used for a company’s operation (lighting, appliances and equipment, cooling).
BOV’s scope 1 and 2 focuses exclusively on the vehicle fleet owned by the Bank, together with 68 BOV-operated buildings and 40
ATMs scattered across Malta. On the other hand, scope 3 relates to the indirect emissions from company’s value chain, upstream and
downstream, including specifically category 15
1
“Investment” or “financed emissions”. Financed emissions are predominately linked to
GHG emitted by entities that receive financial services, loans, or investments from the Bank. In alignment with these objectives, the
Bank has undertaken the compilation of carbon emissions stemming from various sources. This encompasses emissions arising from
the procurement of goods and services, electricity consumption in non-Bank controlled buildings, waste production, business-related
travel by staff, and employee commuting activities.
During 2023, the Bank pursued further through its green transition plan by measuring its emissions from its operations. To gauge the
Bank’s impact on the environment and transform its business with sustainability-based decision-making, BOV continued to collect
information to calculate its carbon emissions for all scopes (excluding financed emissions). The calculations were performed leveraging
the GHG Protocol and the Partnership for Carbon Accounting Financials (PCAF) methodology for financed emissions.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
50
The table below lists the main activities contributing to the Bank’s 2023 carbon footprint classified according to the relevant scope.
Emission scopes and sources identified for BOV’s 2023 carbon footprint assessment.
Greenhouse Gas Emissions
Indicator 2023 Units
Total GHG Emissions
(Scope 1 + Scope 2)
2,197.97 t CO2e
Total GHG Emissions
(Scope 1 + Scope 2 + Scope 3 excl Cat.15)
24,218.65 t CO2e
Scope 1 108.75 t CO2e
Stationary fuel combustion in BOV’s owned or
operated generators
8.24 t CO2e
Fugitive emissions 2.30 t CO2e
Mobile fuel combustion in BOV’s owned or
operated vehicles
98.21 t CO2e
Scope 2 2,089.22 t CO2e
Electricity used in buildings 2,052.33 t CO2e
Electricity used by ATMs. 36.89 t CO2e
Scope 3 (excluding Category 15): 22,020.68 t CO2e
Category 1: Purchased Goods and Services 20,970.12 t CO2e
Category 3: Fuel and Energy Related Activities 11.12 t CO2e
Category 5: Waste Generated in Operations 0.95 t CO2e
Category 6: Business Travel 41.79 t CO2e
Category 7: Employee Commuting 996.70 t CO2e
Note: Data for Scope 1 & 3 (excl. Cat.15) covers January to December 2023, while data for Scope 2 covers
September 2022 to September 2023 due to data limitations.
1.4.1.1 Decarbonisation pathway
In the pursuit of its forward-looking decarbonization strategy, the Bank undertook a comprehensive array of initiatives stemming from
the Decarbonisation Working Group and set a primary objective to reduce GHG emissions within the Bank’s operations by around
20% up to 2026 compared to the base line year of 2021. This multifaceted approach underscored the Bank’s unwavering commitment
to sustainability and environmental responsibility.
The decarbonisation initiatives range from energy-efficient enhancements in Facilities, to responsible IT hardware disposal. Educational
programs were introduced to raise awareness and cultivate responsible waste reduction, energy-saving practices among staff whilst
promoting sustainable transportation options.
Infrastructure improvements included energy-efficient measures such as the implementation of recessed lighting and the adoption of
a Building Management System (BMS). The Bank’s commitment to sustainability extended to its IT infrastructure, with the introduction
of a new primary datacentre. Upgrades like solar panels, the application of UV film on windows, and the acquisition of Energy
Performance Certificates further underscored the Bank’s dedication to improving energy efficiency and reducing its environmental
impact.
Moreover, the Bank plans on installing EV chargers within its premises to further encourage the use of sustainable vehicles by
its employees. Efforts are also made to minimize paper and mail usage, while branch networks are being modernized with smart
lighting and enhanced insulation to contribute to a more sustainable and eco-friendly operation. The decarbonization strategy aims to
significantly reduce the Bank’s carbon footprint and actively promote environmental stewardship.
1.4.2 Article 8 of the Taxonomy Regulation
1.4.2.1 Introduction
With the ambitious goal of achieving net-zero greenhouse gas emissions by 2050, the European Union (EU) has set an interim target
of reducing GHG emissions by 55% relative to 1990 levels by 2030. To facilitate this transition, the European Commission (EC)
has introduced the EU taxonomy
2
, a comprehensive classification system designed to identify economically sustainable activities.
This taxonomy serves as a key tool in determining whether an economic activity qualifies as environmentally sustainable. The initial
step involves assessing the eligibility of an economic activity, with numerous economic activities falling within the scope of the EU
taxonomy. However, it’s important to note that meeting the technical criteria necessary to be classified as environmentally sustainable,
or ‘taxonomy-aligned,’ is a more selective process, reserved for those activities that satisfy the technical criteria.
1
Category 15 presents the scope 3 emissions associated with the Bank’s financed emissions. These emissions will be published in the subsequent publication
with data as at June 2024, in line with Pillar 3 disclosure requirements.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
51
The EU Taxonomy establishes criteria in terms of six environmental objectives, namely,
i) Climate change mitigation;
ii) Climate change adaptation;
iii) Sustainable use and protection of water and marine resources;
iv) Transition to a circular economy;
v) Pollution prevention and control; and
vi) Protection and restoration of biodiversity and ecosystems.
For an economic activity to qualify as environmentally sustainable, it must be assessed to substantially contribute to one of these
environmental objectives, whilst doing no significant harm (‘DNSH’) to the remaining objectives. The DNSH criteria is outlined in the
Technical Screening Criteria established in the Delegated Acts to the EU Taxonomy regulation. Economic activity is also required to
meet minimum safeguards established in the EU Taxonomy regulation.
The Disclosures Delegated Act
3
became applicable for the first time on 1 January 2022, with the first disclosures for the financial
reporting period ended 31 December 2021, adopting a phased-in approach to the disclosure requirements of key performance
indicators. In the previous two years, financial institutions were only required to disclose their proportion of exposures towards
taxonomy-eligible and non-eligible activities. As from reporting period 31 December 2023, financial institutions are required to
disclose the proportion of exposures towards taxonomy-aligned economic activities related to the first two environmental objectives
(climate change mitigation and climate change adaptation) covered by the Climate Delegated Act
4
. The Environmental Delegated Act
5
is applicable from 1 January 2024 and hence the related key performance indicators (KPIs) will be first disclosed as of 31 December
2024.
2
EU Taxonomy Regulation (EU) 2020/852
3
Disclosures Delegated Regulation (EU) 2021/2178
4
Climate Delegated Regulation (EU) 2022/1214 and Climate Delegated Regulation (EU) 2023/2485 (Applicable from January 2024)
5
Environmental Delegated Regulation (EU) 2023/2486 (applicable from January 2024)
1.4.2.2 Assets in Scope
The disclosed amounts pertain to on-balance sheet financial assets within the banking book, encompassing loans, advances, debt
securities, and equity exposures towards corporate clients falling under the Non-Financial Reporting Directive (NFRD). Additionally,
exposures towards residential mortgages, house renovation, and motor vehicles are also in scope.
Nonetheless, certain exposures are excluded from the reporting numerator of the ratios but are considered in the denominator. These
exclusions comprise non-NFRD corporate clients, derivatives, on-demand interbank loans, and other assets, including cash-related
assets. Notably, exposures to central governments, central banks, and supranational entities are entirely excluded from both the
numerator and denominator of the ratios.
1.4.2.3 Scope of BOV Entities
The ratios below represent the exposures and balances relative to total assets for the primary operating entity within the BOV
group as of December 31, 2023. On 21 December 2023, the European Commission published a Draft Commission Notice on
the interpretation and implementation of a number of legal provisions of the Disclosures Delegated Act under Article 8 of the
EU taxonomy Regulation. This notice provided clarifications on how the requirements of the Disclosures Delegated act are to be
implemented. Given the limited time available between the publication of BOV’s annual report and the publication of the European
Commission notice, it has not been operationally possible to implement all aspects of the notice. Consequently, the separate KPI for
the group’s asset management activities have been excluded from this report. The group-level KPI pertaining to the weighted average
of the KPIs for the credit institution and the asset management subsidiary has also been excluded from this report.
Next Submission will include the Individual KPI of asset management and the weighted average KPI at Group level.
1.4.2.4 Taxonomy eligibility and alignment of assets
When assessing the taxonomy eligibility and alignment of their on-balance sheet exposures towards corporate clients, financial
institutions are only allowed to use actual information that has been disclosed by the clients reporting under the NFRD. As a financial
institution, the Bank is required to use the most recently available actual eligibility and alignment information when disclosing its own
eligibility and alignment ratio for the reporting period 31 December 2023.
Taxonomy eligibility and alignment of the Bank’s exposures towards retail clients is reported in line with the Technical Screening
Criteria outlined in Annex I of the Climate Delegated Act.
1.4.2.5 Taxonomy non-eligible and out of scope assets
Taxonomy non-eligible assets consist of the residual exposures to NFRD clients after deducting the Taxonomy-eligible exposures. Out
of scope assets consist of exposures to non-NFRD corporate clients, derivatives, on demand inter-bank loans, other assets including
cash related assets, central governments, central banks, and supranational exposures.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
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The table below highlights the Bank’s taxonomy-eligible and non-eligible assets as a proportion of total assets.
Taxonomy eligible, non-eligible and out-of scope exposures as
a proportion of Total Assets
2023
€ million %
Taxonomy eligible assets as a proportion of total assets 2,956 20.26%
Taxonomy non-eligible assets as a proportion of total assets 2,322 15.92%
Out of scope exposures 9,309 63.82%
1.4.2.6 Data Limitations
The Bank relies on external data sources to determine exposures that are subject to NFRD and to identify exposures that are
Taxonomy eligible, and Taxonomy aligned. Given that undertakings are still adopting the Taxonomy Regulation requirements for their
own disclosures, availability of data is expected to increase in future periods.
To ascertain the exposures to foreign undertakings falling within the scope of the NFRD, the Bank opted to utilize the services of
an external data provider. This decision was made to ensure comprehensive coverage and adherence to regulatory guidelines. The
identification process of undertakings subject to the NFRD, as facilitated by the external data source, aligns with the stipulations
outlined in either Article 19a or Article 29a of Directive 2013/34/EU.
Furthermore, for exposures to local undertakings, the Bank adopted a dual approach. While leveraging the insights provided by the
external data provider, the Bank also conducted internal assessments. Specifically, clients with more than 500 employees during
the reporting period were internally identified as falling within the scope of the NFRD. This multifaceted approach aimed to ensure
robustness in identifying entities subject to NFRD requirements, both domestically and internationally.
The Bank provided the counterparty NACE of its exposures to corporate entities to the external source. NACE is a statistical
classification of economic activities/sectors. Taxonomy eligible as well as taxonomy aligned exposures were derived from the database
of the external data provider based on this counterparty NACE. Data provided is actual data retrieved from the publicly available
information of undertakings in scope of NFRD. NACE classification has some limitations since there are instances where the NACE of
the counterparty and the facility are not aligned.
In line with Annex I of the Climate delegated act, retail exposures secured by residential immovable property and retail lending with
loan purpose for building renovation and motor vehicles have been Taxonomy eligible. To establish Taxonomy alignment, the Bank
used available internal data and only exposures for the purpose of purchasing photovoltaic panels could be identified as Taxonomy
aligned. The Bank is still not in a position to report on the Taxonomy alignment of the other retail exposures since it has not yet been
able to ensure that the DNSH criteria is fulfilled.
The Bank is continuously implementing processes and collecting new data with the aim of improving the availability and accuracy of
the information being reported over time.
1.4.2.7 Key Performance Indicators (KPIs)
Undertakings are required to disclose the share of their turnover, capital expenditure (CapEX) and operating expenditure associated
with taxonomy-eligible, and taxonomy aligned economic activities related to the first two environmental objectives (climate change
mitigation and climate change adaptation) in accordance with Article 8 of the Taxonomy Regulation.
Starting from the reporting period ending on 31 December 2023, financial institutions are mandated to disclose a Green Asset Ratio
(GAR), capturing the share of the Bank’s environmentally sustainable assets (taxonomy aligned) relative to the total assets considered
for the GAR ratio. The GAR ratio draws insights from CapEx and Turnover Key Performance Indicators (KPIs) provided by corporate
clients. By leveraging these KPIs, financial institutions can effectively gauge the extent to which their assets align with environmental
sustainability criteria.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
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Annual Report 2023
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Summary of KPIs to be disclosed by credit institutions under Article 8 Taxonomy Regulation
€ million
Total
environmentally
sustainable assets
- Turnover
Total
environmentally
sustainable
assets - CapEX
KPI
Turnover
KPI
CAPEX
%
coverage
(over total
assets)***
% of assets
excluded from the
numerator of the
GAR (Article 7(2)
and (3) and Section
1.1.2. of Annex V)
% of assets
excluded from the
denominator of the
GAR (Article 7(1)
and Section 1.2.4
of Annex V)
Main KPI Green asset retion
(GAR) stock
3.43 6.28 0.03% 0.06% 75.07% 38.89% 24.93%
Total
environmentally
sustainable
activities
Total
environmentally
sustainable
assets - CapEX
KPI
Turnover
KPI
CAPEX
%
coverage
(over total
assets)***
% of assets
excluded from the
numerator of the
GAR (Article 7(2)
and (3) and Section
1.1.2. of Annex V)
% of assets
excluded from the
denominator of the
GAR (Article 7(1)
and Section 1.2.4
of Annex V)
Additional
KPIs
GAR (flow) 0.34 0.34 0.03% 0.03% 60.44% 20.71% 39.56%
Trading book* - - - -
Financial
guarantees
- - - -
Assets under
management
0.40 1.85 1.22% 5.56%
Fees and
commissions
income
- - - -
* For credit institutions that do not meet the conditions of Article 94(1) of the CRR or the conditions setout in Article 325a(1) of the CRR
** Fees and commissions income from the services other than lending and AuM
Institutions shall disclose forwardlooking information for this KPIs, including information in terms of targets, together with relevant explanations on the
methodology applied.
*** % od assets covered by the KPI over banks’ total assets
Note 1: Across the reporting templates: cells shaded in grey should not be reported
Note 2: Fees and Commissions (sheet 6) and Trading Book (sheet 7) KPIs shall only apply starting 2026. SMEs’ inclusion in these KPI will only apply
subject to a positive result of an impact assessment.
The Bank’s main KPI refers to the GAR for the stock exposures under Turnover and CapEX. €3.43 million and €6.28 million of the
Banks total assets eligible for GAR calculation have been identified as environmentally sustainable under the Turnover and CapEX KPIs
respectively. This is equivalent to 0.03% under Turnover and 0.06% under CapEX.
75% of the Bank’s total on-balance sheet assets are considered eligible in the denominator of the GAR. The uncovered exposure mainly
consists of exposures to central governments and supranational issuers which are not covered by the GAR calculation. Additionally,
almost 39% of the Bank’s on-balance sheet assets are excluded from the numerator of the GAR but included in the denominator.
These consist of exposures to undertakings that are not subject to NFRD disclosure obligations within the EU and outside the EU,
derivatives, on demand interbank loans and other assets included cash-related assets.
Additional KPIs disclosed above include the GAR for new exposures obtained during the current reporting period i.e. GAR (flow) and
the GAR for off-balance sheet assets under management. €0.34 million of the Bank’s total new assets eligible for GAR calculation have
been identified as environmentally sustainable under the Turnover and CapEX KPIs respectively. For the current reporting period, the
GAR flow is made up of retail exposures only. Naturally, such exposure does not differ under Turnover and CapEX. This is equivalent
to 0.029% under Turnover.
Under turnover, €0.4 million of the Bank’s off-balance sheet assets under management
6
have been identified as environmentally
sustainable. This translates into a turnover of KPI equal to 1.22% of the Bank’s off-balance sheet assets towards undertakings that
are subject to NFRD. CapEX KPI for the Bank’s Assets Under Management (AUM)is reported at 5.56% as at 31 December 2023.
6
Off-balance sheet exposures to undertakings that are subject to NFRD.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
54
Million EUR
Disclosure reference date T
Total
[gross]
carrying
amount
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
Water and marine
resources (WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and
Ecosystems (BIO)
TOTAL (CCM + CCA + WTR +
CE + PPC + BIO)
TTRS ES UOP T E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP T E
GAR - Covered assets in both
numerator and denominator
1 Loans and advances,
debt securities and equity
instruments not HfT eligible
for GAR calculation
5,278 2,952 3 0 3 39 0 2,991 3 0 3
2 Financial undertakings 1,829 39 39
3 Credit institutions 1,629 39 39
4 Loans and advances 61
5 Debt securities, including UoP 1,568 39 39
6 Equity instruments 0
7 Other financial corporations 200
8 of which investment firms
9 Loans and advances
10 Debt securities, including UoP
11 Equity instruments
12 of which management
companies
13 Loans and advances
14 Debt securities, including UoP
15 Equity instruments
16 of which insurance
undertakings
2
17 Loans and advances 2
18 Debt securities, including UoP
19 Equity instruments
20 Non-financial undertakings 67 10 2 0 2 0 10 2 0 2
21 Loans and advances 40
22 Debt securities, including UoP 25 10 2 0 2 0 10 2 0 2
23 Equity instruments 2 0 0 0 0 0
24 Households 3,382 2,942 1 1 2,942 1 1
25 of which loans collateralised
by residential immovable
property
2,847 2,847 0 0 2,847 0 0
26 of which building renovation
loans
18 18 1 1 18 1 1
27 of which motor vehicle loans 64 64 0 0 64 0 0
28 Local governments financing
29 Housing financing
30 Other local government
financing
TTRS Of which towards
taxonomy relevant
sectors
(Taxonomy-eligible)
ES Of which
environmentally
sustainable
(Taxonomy-aligned)
UOP Of which Use of
Proceeds
T Of which transitional
E Of which enabling
Template 1 – Covered assets GAR – Turnover
Since this is the first year of reporting the EU Taxonomy templates, there is no previous year comparison information to disclose.
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
55
31 Collateral obtained by taking
possession: residential and
commercial immovable
properties
1 1 0 0 1 0 0
32 Assets excluded from
the numerator for GAR
calculation (covered in the
denominator)
5,672
33 Financial and Non-financial
undertakings
2,797
34 SMEs and NFCs (other than
SMEs) not subject to NFRD
disclosure obligations
2,739
35 Loans and advances 2,657
36 of which loans collateralised
by commercial immovable
property
1,247
37 of which building renovation
loans
38 Debt securities 73
39 Equity instruments 9
40 Non-EU country
counterparties not subject to
NFRD disclosure obligations
58
41 Loans and advances 9
42 Debt securities 49
43 Equity instruments
44 Derivatives 8
45 On demand interbank loans 140
46 Cash and cash-related assets 2,349
47 Other categories of assets
(e.g. Goodwill, commodities
etc.)
379
48 Total GAR assets 10,951 2,952 3 0 3 39 0 2,991 3 0 3
49 Assets not covered for GAR
calculation
3,637
50 Central governments and
Supranational issuers
3,637
51 Central banks exposure 0
52 Trading book
53 Total assets 14,587 2,952 3 0 3 39 0 2,991 3 0 3
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
54 Financial guarantees
55 Assets under management 33 5 0 0 0 0 0 0 0 5 0 0 0 0
56 Of which debt securities 27 5 0 0 0 0 0 0 5 0 0 0 0
57 Of which equity instruments 6 1 0 0 0 0 0 0 0 1 0 0 0 0
Million EUR
Disclosure reference date T
Total
[gross]
carrying
amount
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
Water and marine
resources (WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and
Ecosystems (BIO)
TOTAL (CCM + CCA + WTR +
CE + PPC + BIO)
TTRS ES UOP T E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP T E
GAR - Covered assets in both
numerator and denominator
TTRS Of which towards
taxonomy relevant
sectors
(Taxonomy-eligible)
ES Of which
environmentally
sustainable
(Taxonomy-aligned)
UOP Of which Use of
Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
56
Template 1 – Covered assets GAR – CapEX
1 Loans and advances,
debt securities and equity
instruments not HfT eligible
for GAR calculation
5,278 2,955 6 0 5 0 2,955 6 0 5
2 Financial undertakings 1,829
3 Credit institutions 1,629
4 Loans and advances 61
5 Debt securities, including UoP 1,568
6 Equity instruments 0
7 Other financial corporations 200
8 of which investment firms
9 Loans and advances
10 Debt securities, including UoP
11 Equity instruments
12 of which management
companies
13 Loans and advances
14 Debt securities, including UoP
15 Equity instruments
16 of which insurance
undertakings
2
17 Loans and advances 2
18 Debt securities, including UoP
19 Equity instruments
20 Non-financial undertakings 67 14 5 0 4 0 14 5 0 4
21 Loans and advances 40
22 Debt securities, including UoP 25 14 5 0 4 0 14 5 0 4
23 Equity instruments 2 0 0 0 0 0
24 Households 3,382 2,942 1 1 2,942 1 1
25 of which loans collateralised
by residential immovable
property
2,847 2,847 0 0 2,847 0 0
26 of which building renovation
loans
18 18 1 1 18 1 1
27 of which motor vehicle loans 64 64 0 0 64 0 0
28 Local governments financing
29 Housing financing
30 Other local government
financing
31 Collateral obtained by taking
possession: residential and
commercial immovable
properties
1 1 0 0 1 0 0
Million EUR
Disclosure reference date T
Total
[gross]
carrying
amount
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
Water and marine
resources (WTR)
Circular economy (CE) Pollution (PPC) Biodiversity and
Ecosystems (BIO)
TOTAL (CCM + CCA + WTR +
CE + PPC + BIO)
TTRS ES UOP T E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP T E
GAR - Covered assets in both
numerator and denominator
TTRS Of which towards
taxonomy relevant
sectors
(Taxonomy-eligible)
ES Of which
environmentally
sustainable
(Taxonomy-aligned)
UOP Of which Use of
Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
57
Million EUR
Disclosure reference date T
Total
[gross]
carrying
amount
Climate Change Mitigation
(CCM)
Climate Change
Adaptation (CCA)
Water and marine
resources (WTR)
Circular economy (CE) Pollution (PPC) Biodiversity and
Ecosystems (BIO)
TOTAL (CCM + CCA + WTR +
CE + PPC + BIO)
TTRS ES UOP T E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP E TTRS ES UOP T E
GAR - Covered assets in both
numerator and denominator
TTRS Of which towards
taxonomy relevant
sectors
(Taxonomy-eligible)
ES Of which
environmentally
sustainable
(Taxonomy-aligned)
UOP Of which Use of
Proceeds
T Of which transitional
E Of which enabling
32 Assets excluded from
the numerator for GAR
calculation (covered in the
denominator)
5,672
33 Financial and Non-financial
undertakings
2,797
34 SMEs and NFCs (other than
SMEs) not subject to NFRD
disclosure obligations
2,739
35 Loans and advances 2,657
36 of which loans collateralised
by commercial immovable
property
1,247
37 of which building renovation
loans
38 Debt securities 73
39 Equity instruments 9
40 Non-EU country
counterparties not subject to
NFRD disclosure obligations
58
41 Loans and advances 9
42 Debt securities 49
43 Equity instruments
44 Derivatives 8
45 On demand interbank loans 140
46 Cash and cash-related assets 2,349
47 Other categories of assets
(e.g. Goodwill, commodities
etc.)
379
48 Total GAR assets 10,951 2,956 6 0 5 0 2,956 6 0 5
49 Assets not covered for GAR
calculation
3,637
50 Central governments and
Supranational issuers
3,637
51 Central banks exposure 0
52 Trading book
53 Total assets 14,587 2,956 6 0 5 0 2,956 6 0 5
Off-balance sheet exposures - Undertakings subject to NFRD disclosure obligations
54 Financial guarantees
55 Assets under management 33 7 2 2 0 0 0 0 7 2 2 0 0
56 Of which debt securities 27 6 2 2 0 0 0 0 6 2 2 0 0
57 Of which equity instruments 7 1 0 0 0 0 0 0 1 0 0 0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
58
Template 2 - GAR sector information – Turnover
This template outlines the Taxonomy-eligible and aligned exposure to undertakings subject to NFRD with a breakdown by sector at NACE classification level 4. The Bank’s environmentally sustainable
assets are exposed to ‘C-Manufacturing’, ‘H-Transport and storage’, ‘J-Information and communication’ and ‘Q- Human health and social work activities.’ Template 2 shows only the sectors in which
the Bank has exposures.
Template 2 – Climate change mitigation (CCM) and Climate Change Adaptation (CCA), columns a – h
a b c d e f g h
Breakdown by sector - NACE 4 digits level (code and label)
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA)
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not subject
to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not subject
to NFRD
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCM)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCM)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCA)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCA)
88 C - Manufacturing 5 1 0
224 C21 - Manufacture of basic pharmaceutical products and
pharmaceutical preparations
0 0 0
225 C21.1 - Manufacture of basic pharmaceutical products 0 0 0
382 C29 - Manufacture of motor vehicles, trailers and semi-trailers 5 1 0
383 C29.1 - Manufacture of motor vehicles 5 1 0
390 C30 - Manufacture of other transport equipment 0 0 0
396 C30.3 - Manufacture of air and spacecraft and related machinery 0 0 0
622 H - Transporting and storage 5 2 0
661 H53 - Postal and courier activities 5 2 0
664 H53.2 - Other postal and courier activities 5 2 0
684 J - Information and communication 0 0 0
708 J61 - Telecommunications 0 0 0
709 J61.1 - Wired telecommunications activities 0 0 0
710 J61.1.0 - Wired telecommunications activities 0 0 0
905 Q - Human health and social work activities 0 0 0
915 Q87 - Residential care activities 0 0 0
916 Q87.1 - Residential nursing care activities 0 0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
59
Template 2 – Climate change mitigation (CCM) and Climate Change Adaptation (CCA), columns i-ab
i j k l m n o p q r s t u v w x y z aa ab
Breakdown by sector - NACE 4
digits level (code and label)
Water and marine resources (WTR) Circular economy (CE) Pollution (PPC) Biodiversity and Ecosystems (BIO) TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(WTR)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(WTR)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CE)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CE)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(PPC)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(PPC)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA
+ WTR + CE +
PPC + BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA
+ WTR + CE +
PPC + BIO)
88 C - Manufacturing 5 1
224 C21 - Manufacture of
basic pharmaceutical
products and
pharmaceutical
preparations
0 0
225 C21.1 - Manufacture
of basic pharmaceutical
products
0 0
382 C29 - Manufacture of
motor vehicles, trailers
and semi-trailers
5 1
383 C29.1 - Manufacture
of motor vehicles
5 1
390 C30 - Manufacture
of other transport
equipment
0 0
396 C30.3 - Manufacture
of air and spacecraft
and related machinery
0 0
622 H - Transporting and
storage
5 2
661 H53 - Postal and
courier activities
5 2
664 H53.2 - Other postal
and courier activities
5 2
684 J - Information and
communication
0 0
708 J61 -
Telecommunications
0 0
709 J61.1 - Wired
telecommunications
activities
0 0
710 J61.1.0 - Wired
telecommunications
activities
0 0
905 Q - Human health and
social work activities
0 0
915 Q87 - Residential care
activities
0 0
916 Q87.1 - Residential
nursing care activities
0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
60
Template 2 - GAR sector information – CapEX, columns a-h
a b c d e f g h
Breakdown by sector - NACE 4 digits level (code and label)
Climate Change Mitigation (CCM) Climate Change Adaptation (CCA)
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not subject
to NFRD
Non-Financial corporates (Subject
to NFRD)
SMEs and other NFC not subject
to NFRD
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCM)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCM)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCA)
[Gross]
carrying
amount
Mn EUR
Of which
environmentally
sustainable (CCA)
88 C - Manufacturing 8 2 0
224 C21 - Manufacture of basic pharmaceutical products and
pharmaceutical preparations
0 0 0
225 C21.1 - Manufacture of basic pharmaceutical products 0 0 0
382 C29 - Manufacture of motor vehicles, trailers and semi-
trailers
5 1 0
383 C29.1 - Manufacture of motor vehicles 5 1 0
390 C30 - Manufacture of other transport equipment 3 1 0
396 C30.3 - Manufacture of air and spacecraft and related
machinery
3 1 0
622 H - Transporting and storage 5 3 0
661 H53 - Postal and courier activities 5 3 0
664 H53.2 - Other postal and courier activities 5 3 0
684 J - Information and communication 0 0 0
708 J61 - Telecommunications 0 0 0
709 J61.1 - Wired telecommunications activities 0 0 0
710 J61.1.0 - Wired telecommunications activities 0 0 0
905 Q - Human health and social work activities 0 0 0
915 Q87 - Residential care activities 0 0 0
916 Q87.1 - Residential nursing care activities 0 0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
61
Template 2 - GAR sector information – CapEX, columns i-ab
i j k l m n o p q r s t u v w x y z aa ab
Breakdown by sector - NACE 4
digits level (code and label)
Water and marine resources (WTR) Circular economy (CE) Pollution (PPC) Biodiversity and Ecosystems (BIO) TOTAL (CCM + CCA + WTR + CE + PPC + BIO)
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
Non-Financial corporates
(Subject to NFRD)
SMEs and other NFC not
subject to NFRD
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(WTR)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(WTR)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CE)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CE)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(PPC)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(PPC)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA
+ WTR + CE +
PPC + BIO)
[Gross]
carrying
amount
Mn
EUR
Of which
environmentally
sustainable
(CCM + CCA
+ WTR + CE +
PPC + BIO)
88 C - Manufacturing 8 2
224 C21 - Manufacture of
basic pharmaceutical
products and
pharmaceutical
preparations
0 0
225 C21.1 - Manufacture
of basic
pharmaceutical
products
0 0
382 C29 - Manufacture
of motor vehicles,
trailers and semi-
trailers
5 1
383 C29.1 - Manufacture
of motor vehicles
5 1
390 C30 - Manufacture
of other transport
equipment
3 1
396 C30.3 - Manufacture
of air and spacecraft
and related machinery
3 1
622 H - Transporting and
storage
5 3
661 H53 - Postal and
courier activities
5 3
664 H53.2 - Other postal
and courier activities
5 3
684 J - Information and
communication
0 0
708 J61 -
Telecommunications
0 0
709 J61.1 - Wired
telecommunications
activities
0 0
710 J61.1.0 - Wired
telecommunications
activities
0 0
905 Q - Human health
and social work
activities
0 0
915 Q87 - Residential
care activities
0 0
916 Q87.1 - Residential
nursing care activities
0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
62
Template 3 - GAR KPI Stock – Turnover
Template 3 outlines the Taxonomy-eligible and aligned stock exposures for the reporting period 31 December 2023.
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
% (compared to total
covered assets in the
denominator)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL (CCM + CCA + WTR + CE +
PPC + BIO)
Proportion
of total
assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
1 Loans and advances,
debt securities and
equity instruments
not HfT eligible for
GAR calculation
26.96% 0.03% 0.00% 0.00% 0.03% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 27.31% 0.03% 0.00% 0.00% 0.03% 36.18%
2 Financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 12.54%
3 Credit institutions 0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 11.17%
4 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.42%
5 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.35% 0.00% 0.00% 0.00% 0.00% 10.75%
6 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
7 Other financial
corporations
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.37%
8 of which investment
firms
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
9 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
10 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
11 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12 of which
management
companies
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
13 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
14 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
16 of which insurance
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
17 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
18 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
19 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
20 Non-financial
undertakings
0.09% 0.02% 0.00% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.09% 0.02% 0.00% 0.00% 0.02% 0.46%
21 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.27%
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
63
22 Debt securities,
including UoP
0.09% 0.02% 0.00% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.09% 0.02% 0.00% 0.00% 0.02% 0.17%
23 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
24 Households 26.86% 0.01% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.86% 0.01% 0.00% 0.00% 0.01% 23.18%
25 of which loans
collateralised
by residential
immovable property
26.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.00% 0.00% 0.00% 0.00% 0.00% 19.52%
26 of which building
renovation loans
0.17% 0.01% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.17% 0.01% 0.00% 0.00% 0.01% 0.13%
27 of which motor
vehicle loans
0.59% 0.00% 0.00% 0.00% 0.00% 0.59% 0.00% 0.00% 0.00% 0.00% 0.44%
28 Local governments
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
29 Housing financing 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
30 Other local
government
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
31 Collateral
obtained by
taking possession:
residential and
commercial
immovable
properties
0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00%
32 Total GAR assets 26.96% 0.03% 0.00% 0.00% 0.03% 0.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 27.32% 0.03% 0.00% 0.00% 0.03% 75.07%
% (compared to total
covered assets in the
denominator)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL (CCM + CCA + WTR + CE +
PPC + BIO)
Proportion
of total
assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
64
Template 3 - GAR KPI Stock – CapEX
1 Loans and advances,
debt securities and
equity instruments
not HfT eligible for
GAR calculation
26.99% 0.06% 0.00% 0.00% 0.05% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.99% 0.06% 0.00% 0.00% 0.05% 36.18%
2 Financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 12.54%
3 Credit institutions 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 11.17%
4 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.42%
5 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 10.75%
6 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
7 Other financial
corporations
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.37%
8 of which investment
firms
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
9 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
10 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
11 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12 of which
management
companies
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
13 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
14 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
16 of which insurance
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
17 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
18 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
19 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
20 Non-financial
undertakings
0.13% 0.05% 0.00% 0.00% 0.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.13% 0.05% 0.00% 0.00% 0.04% 0.46%
21 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.27%
% (compared to total
covered assets in the
denominator)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL (CCM + CCA + WTR + CE +
PPC + BIO)
Proportion
of total
assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
65
22 Debt securities,
including UoP
0.12% 0.05% 0.00% 0.00% 0.04% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.12% 0.05% 0.00% 0.00% 0.04% 0.17%
23 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
24 Households 26.86% 0.01% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.86% 0.01% 0.00% 0.00% 0.01% 23.18%
25 of which loans
collateralised
by residential
immovable property
26.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.00% 0.00% 0.00% 0.00% 0.00% 19.52%
26 of which building
renovation loans
0.17% 0.01% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.17% 0.01% 0.00% 0.00% 0.01% 0.13%
27 of which motor
vehicle loans
0.59% 0.00% 0.00% 0.00% 0.00% 0.59% 0.00% 0.00% 0.00% 0.00% 0.44%
28 Local governments
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
29 Housing financing 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
30 Other local
government
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
31 Collateral
obtained by
taking possession:
residential and
commercial
immovable
properties
0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00%
32 Total GAR assets 26.99% 0.06% 0.00% 0.00% 0.05% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 26.99% 0.06% 0.00% 0.00% 0.05% 75.07%
% (compared to total
covered assets in the
denominator)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL (CCM + CCA + WTR + CE +
PPC + BIO)
Proportion
of total
assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
66
Template 4 - GAR KPI Flow – Turnover
Template 4 under Turnover and CapEX are identical because the flow assets relate to retail exposure, and these do not distinguish between Turnover and CapEX KPIs.
% (compared to flow of
total eligible assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
Proportion
of total
new assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
1 Loans and advances,
debt securities and
equity instruments
not HfT eligible for
GAR calculation
24.72% 0.03% 0.00% 0.00% 0.03% 1.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 25.88% 0.03% 0.00% 0.00% 0.03% 39.73%
2 Financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 19.83%
3 Credit institutions 0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 19.73%
4 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
5 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.16% 0.00% 0.00% 0.00% 0.00% 19.73%
6 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
7 Other financial
corporations
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.10%
8 of which investment
firms
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
9 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
10 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
11 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12 of which
management
companies
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
13 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
14 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
16 of which insurance
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
17 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
18 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
19 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
20 Non-financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.43%
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
67
21 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.42%
22 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
23 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
24 Households 24.72% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 24.72% 0.03% 0.00% 0.00% 0.03% 19.47%
25 of which loans
collateralised
by residential
immovable property
20.52% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 20.52% 0.00% 0.00% 0.00% 0.00% 12.40%
26 of which building
renovation loans
0.81% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.81% 0.03% 0.00% 0.00% 0.03% 0.49%
27 of which motor
vehicle loans
3.37% 0.00% 0.00% 0.00% 0.00% 3.37% 0.00% 0.00% 0.00% 0.00% 2.04%
28 Local governments
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
29 Housing financing 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
30 Other local
government
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
31 Collateral
obtained by
taking possession:
residential and
commercial
immovable
properties
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
32 Total GAR assets 24.72% 0.03% 0.00% 0.00% 0.03% 1.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 25.88% 0.03% 0.00% 0.00% 0.03% 60.44%
% (compared to flow of
total eligible assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
Proportion
of total
new assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
68
Template 4 - GAR KPI Flow – CapEX
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
1 Loans and advances,
debt securities and
equity instruments
not HfT eligible for
GAR calculation
24.72% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 24.72% 0.03% 0.00% 0.00% 0.03% 39.73%
2 Financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 19.83%
3 Credit institutions 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 19.73%
4 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
5 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 19.73%
6 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
7 Other financial
corporations
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.10%
8 of which investment
firms
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
9 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
10 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
11 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12 of which
management
companies
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
13 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
14 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
15 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
16 of which insurance
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
17 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
18 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
19 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
20 Non-financial
undertakings
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.43%
% (compared to flow of
total eligible assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
Proportion
of total
new assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
69
% (compared to flow of
total eligible assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
Proportion
of total
new assets
covered
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets
in both numerator and
denominator
21 Loans and advances 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.42%
22 Debt securities,
including UoP
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.01%
23 Equity instruments 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
24 Households 24.72% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 24.72% 0.03% 0.00% 0.00% 0.03% 19.47%
25 of which loans
collateralised
by residential
immovable property
20.52% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 20.52% 0.00% 0.00% 0.00% 0.00% 12.40%
26 of which building
renovation loans
0.81% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.81% 0.03% 0.00% 0.00% 0.03% 0.49%
27 of which motor
vehicle loans
3.37% 0.00% 0.00% 0.00% 0.00% 3.37% 0.00% 0.00% 0.00% 0.00% 2.04%
28 Local governments
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
29 Housing financing 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
30 Other local
government
financing
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
31 Collateral
obtained by
taking possession:
residential and
commercial
immovable
properties
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
32 Total GAR assets 24.72% 0.03% 0.00% 0.00% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 24.72% 0.03% 0.00% 0.00% 0.03% 60.44%
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
70
Template 5 - KPI off-balance sheet exposures - Turnover
1 Financial guarantees (FinGuar KPI)
2 Assets under management (AuM
KPI)
16.31% 1.22% - 0.04% 0.20% 0.17% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 16.49% 1.22% - 0.04% 0.20%
% (compared to flow of total eligible
assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets in both
numerator and denominator
TE Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-eligible)
TA Proportion of total covered assets funding taxonomy relevant sectors (Taxonomy-aligned)
UOP Of which Use of Proceeds
T Of which transitional
E Of which enabling
Template 5 - KPI off-balance sheet exposures - CapEX
% (compared to flow of total eligible
assets)
Disclosure reference date T
Climate Change Mitigation (CCM)
Climate Change Adaptation
(CCA)
Water and marine resources
(WTR)
Circular economy (CE) Pollution (PPC)
Biodiversity and Ecosystems
(BIO)
TOTAL
(CCM + CCA + WTR + CE + PPC + BIO)
TE TA UOP T E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP E TE TA UOP T E
GAR - Covered assets in both
numerator and denominator
1 Financial guarantees (FinGuar KPI)
2 Assets under management (AuM
KPI)
20.09% 5.56% 0.00% 0.99% 0.81% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 20.09% 5.56% 0.00% 0.99% 0.81%
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
71
Nuclear and Fossil Gas – related activities
Template 1 below outlines whether or not BOV is exposed to Nuclear and Gas activities. As at 31 December 2023, BOV had exposures towards counterparties which carry out fossil gas related
activities. Due to the unavailability of the KPIs by the counterparties, the Bank is not able to disclose Taxonomy-eligible and non-eligible KPIs in Templates 4 and 5 below. Such exposures are presented
as not-eligible and not-aligned, in line with the FAQs presented by the EC.
Template 1 – Nuclear and fossil gas related activities
Row Nuclear energy related activities
1 The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear
processes with minimal waste from the fuel cycle.
NO
2 The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district
heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies.
NO
3 The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or
industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.
NO
Fossil gas related activities
4 The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels. YES
5 The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels. NO
6 The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels. NO
Template 4 – Taxonomy-eligible but not taxonomy-aligned economic activities
Proportion (the information is to be presented in monetary amounts and as
percentages)
(CCM+CCA)
Climate change
mitigation
Climate change
adaptation
Row Economic activities Amount % Amount % Amount %
1 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.26 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
2 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.27 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
3 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.28 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
4 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.29 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
5 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.30 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
6 Amount and proportion of taxonomy-eligible but not taxonomy-aligned economic activity referred to in Section 4.31 of Annexes I
and II to Delegated Regulation 2021/2139 in the denominator of the applicable KPI
0 0 0
7 Amount and proportion of other taxonomy-eligible but not taxonomy-aligned economic activities not referred to in rows 1 to 6
above in the denominator of the applicable KPI
0 0 0
8 Total amount and proportion of taxonomy eligible but not taxonomy-aligned economic activities in the denominator of the
applicable KPI
0 0 0
Environmental Social and Governance (ESG)
Risk Management and Disclosures
(continued)
Bank of Valletta p.l.c.
Annual Report 2023
72
Template 5 – Taxonomy non-eligible economic activities
Row Economic activities Amount Percentage
1 Amount and proportion of economic activity referred to in row 1 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.26 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
2 Amount and proportion of economic activity referred to in row 2 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.27 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
3 Amount and proportion of economic activity referred to in row 3 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.28 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
4 Amount and proportion of economic activity referred to in row 4 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.29 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
5 Amount and proportion of economic activity referred to in row 5 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.30 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
6 Amount and proportion of economic activity referred to in row 6 of Template 1 that is taxonomy-non-eligible in accordance with Section 4.31 of Annexes I and II to Delegated
Regulation 2021/2139 in the denominator of the applicable KPI
0 0
7 Amount and proportion of other taxonomy-non-eligible economic activities not referred to in rows 1 to 6 above in the denominator of the applicable KPI 0 0
8 Total amount and proportion of taxonomy-non-eligible economic activities in the denominator of the applicable KPI 0 0
Statements of profit or loss
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
73
The Group The Bank
Note 2023 2022 2023 2022
restated
1
€000 €000 €000 €000
Interest and similar income
- on loans and advances 2 323,404 196,277 323,404 196,277
- on debt, other fixed income instruments and derivatives 2 77,998 23,933 77,998 23,933
Interest expense 3 (49,403) (18,311) (49,403) (18,311)
Net interest income 351,999 201,899 351,999 201,899
Fee and commission income 91,988 89,114 83,796 79,995
Fee and commission expense (13,941) (12,546) (13,941) (12,546)
Net fee and commission income 4 78,047 76,568 69,855 67,449
Dividend income 2,740 641 9,802 9,386
Trading profits 5 8,205 14,163 8,194 14,206
Net gain on investment securities and hedging instruments 6 11 86 11 86
Operating income 441,002 293,357 439,861 293,026
Employee compensation and benefits 7 (111,061) (100,033) (108,394) (97,659)
General administrative expenses (78,659) (72,945) (76,815) (71,075)
Amortisation of intangible assets 20 (13,791) (11,861) (13,691) (11,772)
Depreciation 21 (7,389) (7,777) (7,342) (7,716)
Net impairment reversal 8 10,481 49,075 10,481 49,075
Operating profit before litigation settlement charge 240,583 149,816 244,100 153,879
Net litigation settlement charge 33 - (102,958) - (102,958)
Operating profit 240,583 46,858 244,100 50,921
Share of results of equity-accounted investees, net of tax 18 11,030 2,217 - -
Profit before tax 9 251,613 49,075 244,100 50,921
Income tax expense 10 (83,677) (17,547) (84,825) (18,514)
Profit for the year 167,936 31,528 159,275 32,407
Earnings per share 11 28.8 c 5.4 c 27.3 c 5.6 c
1
Restated comparatives in the financial statements due to the adoption of IFRS 17 and IFRS 9 by the associates are detailed in Note 1.1.4.3.
Statements of profit or loss and other comprehensive income
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
74
The Group The Bank
2023 2022 2023 2022
restated
€000 €000 €000 €000
Profit for the year 167,936 31,528 159,275 32,407
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Debt investments at FVOCI
- change in fair value 1,615 (4,823) 1,615 (4,823)
tax thereon (565) 1,688 (565) 1,688
1,050 (3,135) 1,050 (3,135)
Items that will not be reclassified to profit or loss:
Equity investments at FVOCI
- change in fair value (247) (1,723) (247) (1,723)
tax thereon 86 603 86 603
Property revaluation 4,255 3,366 4,255 3,366
tax thereon and effect of changes in property tax rates (426) (337) (426) (337)
Release on sale of property 84 - 84 -
tax thereon (8) - (8) -
Remeasurement of actuarial losses on defined benefit plans 154 2,485 154 2,485
tax thereon (54) (870) (54) (870)
Other comprehensive income for the year, net of tax 4,894 389 4,894 389
Total comprehensive income 172,830 31,917 164,169 32,796
The notes are an integral part of these financial statements.
Statements of financial position
as at 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
75
The Group The Bank
Note 2023 31 Dec 2022 1 Jan 2022 2023 2022
restated restated
€000 €000 €000 €000 €000
ASSETS
Balances with Central Bank of Malta, treasury bills and cash 13 2,353,317 3,389,261 4,626,066 2,353,317 3,389,261
Financial assets at fair value through profit or loss 14 113,853 146,363 138,986 113,562 146,211
Investments 15 4,366,633 3,831,892 2,531,780 4,366,633 3,831,892
Pledged investments 15 986,829 735,172 1,036,889 986,829 735,172
Loans and advances to banks 16 196,307 394,546 452,469 196,307 394,546
Loans and advances to customers at amortised cost 17 6,114,589 5,560,076 5,097,598 6,114,589 5,560,076
Investments in equity-accounted investees 18 110,098 100,206 99,735 72,870 72,870
Investments in subsidiary companies 19 - - - 6,230 6,230
Intangible assets 20 54,642 56,047 56,074 54,531 55,836
Property and equipment 21 134,172 132,691 130,622 134,125 132,605
Current tax - 20,706 28,640 - 21,017
Deferred tax 23 34,025 67,898 84,563 33,937 67,872
Assets held for realisation 40 11,979 12,138 11,740 11,979 12,138
Other assets 24 12,746 7,227 5,423 12,746 7,227
Prepayments 17,758 18,521 12,091 15,682 16,112
Total Assets 14,506,948 14,472,744 14,312,676 14,473,337 14,449,065
LIABILITIES
Derivative liabilities held for risk management 14 4,154 4,535 5,485 4,154 4,535
Amounts owed to banks 25 315,651 77,074 560,117 315,651 77,074
Amounts owed to customers 26 12,152,216 12,547,911 12,176,854 12,157,044 12,554,584
Current tax 28,079 - - 28,912 -
Deferred tax 23 7,435 7,054 6,717 7,435 7,054
Other liabilities 27 198,178 191,552 203,141 197,651 191,284
Provisions 33 20,166 16,518 104,449 20,016 16,368
Derivatives designated for hedge accounting 29 - 2,167 12,157 - 2,167
Debt securities in issue 30 350,099 350,260 - 350,099 350,260
Subordinated liabilities 30 163,237 163,237 163,237 163,237 163,237
Total Liabilities 13,239,215 13,360,308 13,232,157 13,244,199 13,366,563
EQUITY
Called up share capital 31 583,849 583,849 583,849 583,849 583,849
Share premium account 49,277 49,277 49,277 49,277 49,277
Revaluation reserves 32 59,628 57,212 58,438 59,516 57,100
Retained earnings 32 574,979 422,098 388,955 536,496 392,276
Total Equity 1,267,733 1,112,436 1,080,519 1,229,138 1,082,502
Total Liabilities and Equity 14,506,948 14,472,744 14,312,676 14,473,337 14,449,065
MEMORANDUM ITEMS
Contingent liabilities 33 394,414 374,109 351,362 394,414 374,109
Commitments 34 2,315,962 1,918,119 1,898,310 2,315,944 1,918,119
The notes are an integral part of these financial statements.
These financial statements on pages 73 to 175 were approved by the Board of Directors and authorised for issue on 27 March 2024
and signed on its behalf by Dr Gordon Cordina (Chairman), Deborah Schembri (Director) and Kenneth Farrugia (Chief Executive Officer)
as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Report and Accounts 2023.
Statements in changes of equity
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
76
Share
Capital
Share
Premium
Account
Revaluation
Reserves
Retained
Earnings Total
The Group €000 €000 €000 €000 €000
At 1 January 2022 as previously reported 583,849 49,277 58,438 434,721 1,126,285
Adjustment on initial application of IFRS 17 by equity
accounted investees, net of tax
- - - (45,766) (45,766)
Restated balance as at 1 January 2022 583,849 49,277 58,438 388,955 1,080,519
Profit for the year (restated) - - - 31,528 31,528
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax - - (3,135) - (3,135)
Equity investments at FVOCI
- change in fair value, net of tax - - (1,120) - (1,120)
Property revaluation, net of tax - - 3,029 - 3,029
Remeasurement of actuarial losses on defined benefit plans,
net of tax
- - - 1,615 1,615
Total other comprehensive income - - (1,226) 1,615 389
Total comprehensive income for the year (restated) - - (1,226) 33,143 31,917
Restated balance as at 31 December 2022 583,849 49,277 57,212 422,098 1,112,436
At 1 January 2023 583,849 49,277 57,212 422,098 1,112,436
Profit for the year - - - 167,936 167,936
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax - - 1,050 - 1,050
Equity investments at FVOCI
- change in fair value, net of tax - - (161) - (161)
- gain on sale - - (1,982) 1,982 -
Property revaluation, net of tax - - 3,829 - 3,829
Release on sale of property, net of tax - - (320) 396 76
Remeasurement of actuarial losses on defined benefit plans,
net of tax
- - - 100 100
Total other comprehensive income - - 2,416 2,478 4,894
Total comprehensive income for the year - - 2,416 170,414 172,830
Dividends to equity holders - - - (17,533) (17,533)
At 31 December 2023 583,849 49,277 59,628 574,979 1,267,733
The notes are an integral part of these financial statements.
Statements in changes of equity
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
77
Share
Capital
Share
Premium
Account
Revaluation
Reserves
Retained
Earnings Total
The Bank €000 €000 €000 €000 €000
At 1 January 2022 583,849 49,277 58,326 358,254 1,049,706
Profit for the year - - - 32,407 32,407
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax - - (3,135) - (3,135)
Equity investments at FVOCI
- change in fair value, net of tax - - (1,120) - (1,120)
Property revaluation, net of tax - - 3,029 - 3,029
Remeasurement of actuarial losses on defined benefit plans,
net of tax
- - - 1,615 1,615
Total other comprehensive income - - (1,226) 1,615 389
Total comprehensive income for the year - - (1,226) 34,022 32,796
At 1 January 2023 583,849 49,277 57,100 392,276 1,082,502
Profit for the year - - - 159,275 159,275
Other comprehensive income
Debt investments at FVOCI
- change in fair value, net of tax - - 1,050 - 1,050
Equity investments at FVOCI
- change in fair value, net of tax - - (161) - (161)
- gain on sale - - (1,982) 1,982 -
Property revaluation, net of tax - - 3,829 - 3,829
Release on sale of property, net of tax - - (320) 396 76
Remeasurement of actuarial losses on defined benefit plans,
net of tax
- - - 100 100
Total other comprehensive income - - 2,416 2,478 4,894
Total comprehensive income for the year - - 2,416 161,753 164,169
Dividends to equity holders - - - (17,533) (17,533)
At 31 December 2023 583,849 49,277 59,516 536,496 1,229,138
The notes are an integral part of these financial statements.
(continued)
Statements of cashflows
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
78
The Group The Bank
Note 2023 2022 2023 2022
€000 €000 €000 €000
Cash flows from operating activities
Interest and commission receipts 418,039 292,044 409,842 282,958
Interest, commission and compensation payments (22,657) (22,542) (22,657) (22,542)
Receipt from sale of non-performing loans 8 26,000 - 26,000 -
Payments to employees and suppliers (182,751) (171,472) (178,953) (166,474)
Operating profit before changes in operating assets and
liabilities
238,631 98,030 234,232 93,942
(Increase)/decrease in operating assets:
Loans and advances to banks and customers (521,286) (391,817) (521,286) (391,817)
Reserve deposit with Central Bank of Malta 13 5,093 (8,866) 5,093 (8,866)
Fair value through profit or loss financial assets 22,280 (24,765) 22,286 (24,765)
Fair value through profit or loss equity instruments 72 (63) 201 (63)
Treasury bills with original maturity of more than 3 months 2,964 50,125 2,964 50,125
Other assets (4,627) (1,771) (4,627) (1,772)
Increase/(decrease) in operating liabilities:
Amounts owed to banks and to customers (301,710) (89,253) (303,555) (91,715)
Other liabilities (1,935) (199,433) (1,823) (199,515)
Net cash from operating activities before tax (560,518) (567,813) (566,515) (574,446)
Tax (paid)/refunded (1,593) 6,440 (1,535) 5,753
Net cash used in operating activities (562,111) (561,373) (568,050) (568,693)
Cash flows from investing activities
Dividends received 3,878 2,387 9,802 9,386
Interest received from amortised and other fixed income
instruments
50,073 30,940 50,073 30,940
Purchase of debt instruments 14,15 (1,876,446) (1,535,766) (1,876,446) (1,535,766)
Proceeds from sale or maturity of debt instruments 1,094,631 511,350 1,094,631 511,350
Purchase of property and equipment and intangible assets (17,583) (16,567) (17,575) (16,259)
Proceeds from sale of equity instruments 14,15 7,897 - 7,897 -
Net cash used in investing activities (737,550) (1,007,656) (731,618) (1,000,349)
Cash flows from financing activities
Interest paid on long-term liabilities 3 (5,781) (5,781) (5,781) (5,781)
Proceeds from issue of senior non-preferred notes 30 - 350,000 - 350,000
Outflows from issue of senior non-preferred notes (35,830) (2,274) (35,830) (2,274)
Payment of lease liabilities 22 (1,763) (1,739) (1,756) (1,726)
Dividends paid to equity holders 12 (17,533) (10,019) (17,533) (10,019)
Net cash (used in)/from financing activities (60,907) 330,187 (60,900) 330,200
Net change in cash and cash equivalents after fx changes (1,360,568) (1,238,842) (1,360,568) (1,238,842)
Effect of exchange rate changes on cash and cash equivalents 94 433 94 433
Net change in cash and cash equivalents before effect of
exchange rate changes
(1,360,662) (1,239,275) (1,360,662) (1,239,275)
Net change in cash and cash equivalents (1,360,568) (1,238,842) (1,360,568) (1,238,842)
Cash and cash equivalents at 1 January 3,579,302 4,818,144 3,579,302 4,818,144
Cash and cash equivalents at 31 December 36 2,218,734 3,579,302 2,218,734 3,579,302
The notes are an integral part of these financial statements.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
79
1. MATERIAL ACCOUNTING POLICIES
1.1 Basis of preparation
Legal Notice 19 of 2009 as amended by Legal Notice 233 of 2016, Accountancy Profession (Accounting and Auditing Standards)
(Amendments) Regulations, 2016, defines compliance with generally accepted accounting principles and practice as adherence to
International Financial Reporting Standards (IFRS) as adopted by the EU for financial periods starting on or after 1 January 2008.
These Regulations have come into force on 17 June 2016.
Article 4 of Regulation 1606/2002/EC requires that, for each financial period starting on or after 1 January 2005, companies governed
by the law of an EU Member State shall prepare their consolidated financial statements in conformity with IFRS as adopted by the
EU if, at their reporting date, their securities are admitted to trading on a regulated market of any EU Member State. This Regulation
prevails over the provisions of the Companies Act, 1995, (Chapter 386, Laws of Malta) to the extent that the said provisions of
the Companies Act, 1995, (Chapter 386, Laws of Malta) are incompatible with the provisions of the Regulation. Consequently, the
separate and the consolidated financial statements are prepared in conformity with IFRS as adopted by the EU. These financial
statements have also been prepared in accordance with the provisions of the Banking Act, 1994 (Chapter 371, Laws of Malta) and the
Companies Act, 1995 (Chapter 386, Laws of Malta).
The financial statements have been prepared on the historical cost basis. Assets and liabilities are measured at historical cost except
for the following that are measured at fair value: financial assets measured at fair value through other comprehensive income (FVOCI),
financial instruments classified at fair value through profit or loss (FVTPL), derivatives and land and buildings. Additionally, assets held
for realisation are measured at fair value less costs to sell if it is lower than their cost.
References to the ‘Group’ applies also to the ‘Bank’.
1.1.1 Going concern
Stress testing scenarios were carried out to evaluate the appropriateness of the going concern basis in preparing the financial
statements for 2023.
In making this assessment as at 31 December 2023, which is at least, but not limited to, twelve months from the end of the reporting
period, the Directors considered the Group’s business, profitability projections, funding and capital plans, together with a range of
other factors such as the prolongation of the Russia/Ukraine conflict brought about and the outlook for the Maltese and European
economy. The matters of primary consideration by the Directors are set out below:
Capital: The Group has developed capital plans under base and stress scenarios and the Directors believe that the Group has sufficient
capital to meet its regulatory capital requirements throughout the period of assessment. Stress tests used (both for capital and
liquidity) were based upon an assessment of reasonably possible downside that the Group may experience. Taking into consideration
the capital regulatory requirements together with a management buffer, a surplus in all capital ratios is reported under all severities.
Funding and Liquidity: The Directors have considered the Group’s funding and liquidity position and are satisfied that the Group has
sufficient funding and liquidity throughout the period of assessment. This statement is based on the development of different stress
testing scenarios.
In the prior year, in order to meet regulatory requirements pertaining to MREL, the Bank had obtained approval from the Central Bank
of Ireland for a base prospectus towards the establishment of a Euro Medium Note Programme of a maximum amount of €500 million.
On 6 December 2022, the Bank issued €350 million Senior non-preferred notes (Refer to Note 30).
Based on the above, the Directors consider it appropriate to prepare the financial statements on a going concern basis having
concluded that there are no material uncertainties related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern over the period of assessment.
1.1.2 New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1
January 2023:
- Amendments to IAS 12 Income taxes: International Tax Reform – Pillar Two Model Rules (issued on 23 May 2023)
- Amendments to IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(issued on 7 May 2021)
- IFRS 17 Insurance Contracts (issued on 18 May 2017); including Amendments to IFRS 17 (issued on 25 June 2020)
- Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 – Comparative Information
(issued on 9 December 2021)
- Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
(issued on 12 February 2021)
- Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
(issued on 12 February 2021)
The impact of the application of IFRS 17 and IFRS 9 by the associates is disclosed in Note 1.1.4. The Bank considered whether its
personal and business credit cards, which provide insurance coverage were within the scope of IFRS 17. The Bank concluded that
these insurance coverage clauses do not create additional rights or obligations that would not have existed in the absence of those
clauses. The insurance contract is between the customer and the insurer and hence the Bank has no insurance risk in this regard. The
remaining amendments did not have a significant impact on the Group and the Bank’s annual report as at 31 December 2023.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
80
1. MATERIAL ACCOUNTING POLICIES (continued)
1.1 Basis of preparation (continued)
1.1.3 Standards issued but not yet effective
These standards and amendments include the following:
- On 22 September 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) with amendments
that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15
to be accounted for as a sale. The amendments are effective for annual periods beginning on or after 1 January 2024 with earlier
application permitted.
- The IASB issued the amendments to IAS 1 Presentation of Financial Statements:
o Classification of Liabilities as Current or Non-current (issued 23 January 2020)
o Classification of Liabilities as Current or Non-current – Deferral of Effective Date (issued on 15 June 2020); and
o Non-current Liabilities with Covenants (issued on 31 October 2022)
The amendments are effective for reporting periods beginning on or after 1 January 2024 and are applied retrospectively in accordance
with IAS 8 and earlier application is permitted. Such amendments are not expected to have a significant impact on the Group.
1.1.4 The adoption of IFRS 17 and IFRS 9 by associate entities
The associates (refer to Note 18) of the Group have applied IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments for the first
time on 1 January 2023. These standards have brought significant changes to the accounting for insurance and reinsurance contracts
and financial instruments and have had a material impact on the associates consolidated financial statements in the period of initial
application.
1.1.4.1 Nature of the change in accounting policies impacting the associates
IFRS 17 introduced a different methodology for the valuation of insurance contracts compared to IFRS 4. As such, the nature of the
changes in the associates accounting policies relates to the identification of contracts in the scope of IFRS 17, the level of aggregation,
contract boundaries, measurement, presentation, and disclosure. Total Equity for the associates on transition date saw a reduction
with the major impact emanating from the de-recognition of value in-force business.
The Value of in-force business under IFRS 4 represented the net present value of future cash flows expected from contracts in force
at the respective year-end, with movement in value recognised in other comprehensive income. Under IFRS 17, such an intangible
asset is no longer recognisable, and instead recognises the Contractual Service Margin (CSM) released over time to reflect insurance
contract services transferred to policyholders during the reporting period.
IFRS 9 has brought about changes to the classification, measurement, and recognition of financial instruments.
1.1.4.2 Transitional provisions
IFRS 17 must be applied retrospectively and consequently the associates have restated the opening Statement of financial position
(i.e. at 1 January 2022) as well as the Statement of profit or loss for 2022 and Statement of financial position as at 31 December 2022.
As permitted by the transitional provisions of IFRS 9, the associates availed themselves of the exemptions from full retrospective
application and any adjustments to the carrying amounts of financial assets and financial liabilities at the date of transition due to IFRS
9 were recognised in the opening retained earnings of the current year. The transition adjustment due to IFRS 9 was not material to
the Group.
1.1.4.3 Impact on BOV Group financial position and performance
In view of the changes reflected in the associates because of the initial application of IFRS 17 and IFRS 9, the Group has also reflected
such changes within its Statement of Financial Position, Statement of Profit or Loss and the Statement of Changes in Equity in line
with IAS 8. The below tables present the adjustments as presented by the associates for restatement of the comparative information:
Investments in equity accounted-investees €000Opening balance as at 1 January 2022 as previously stated 145,501 Adjustment on initial application of IFRS 17 (45,766)Restated opening balance as at 1 January 2022 99,735 Restated share of results for the year ended 31 December 2022 of equity-accounted investees, net of tax 2,217 Dividend received (1,746)Restated closing balance as at 31 December 2022 100,206 Group retained earnings €000Opening balance as at 1 January 2022 as previously stated 434,721 Adjustment on initial application of IFRS 17 (45,766)Restated opening balance as at 1 January 2022 388,955 Restated profit for the year ended 31 December 2022 31,528 Remeasurement of actuarial losses on defined benefit plans, net of tax 1,615 Restated closing balance as at 31 December 2022 422,098
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
81
1. MATERIAL ACCOUNTING POLICIES (continued)
1.1 Basis of preparation (continued)
1.1.5 Standards and amendments not yet endorsed by the EU
The following new standards and amendments have not yet been endorsed by the EU:
- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures: Supplier Finance Arrangements
(issued 25 May 2023)
- Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (issued on 15 August 2023)
1.2 Basis of consolidation
The Group financial statements comprise the financial statements of Bank of Valletta p.l.c., (the Bank), a public liability company
domiciled and incorporated in Malta, and its subsidiaries. Subsidiaries are entities controlled by the Group. The Group ‘controls’ an
entity if it is exposed to, or has rights to, variable returns from its involvement with the entity. The Group reassesses whether it has
control if there are changes to one or more of the elements of control. This includes circumstances in which protective rights held
(e.g., those resulting from a lending relationship) become substantive and lead to the Group having power over an investee. The
results of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases. Intragroup balances, transactions, income and expenses are eliminated on consolidation. Non-controlling interests that
represent ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation
may be initially measured either at their present ownership interests’ proportionate share in the recognised amounts of the acquiree’s
identifiable net assets or at fair value. The choice of measurement basis is made on an acquisition-by-acquisition basis. After initial
recognition, non-controlling interests in the net assets consist of the amount of those interests at the date of the original business
combination and the non-controlling interests’ share of changes in equity since the date of the combination.
The excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities is recognised
as goodwill and is included within the carrying amount of the investment and assessed for impairment as part of the investment.
If the cost of acquisition is less than the Group’s share of the net fair value of the identifiable assets and liabilities, the difference is
included as income in the determination of the Group’s share of the profit or loss in the period in which the investment is acquired.
Equity-accounted investees comprise interests in associates. The results and assets and liabilities of equity-accounted investees are
incorporated in the consolidated financial statements using the equity method of accounting from the date that significant influence
or joint control commences until the date that significant influence or joint control ceases. Equity-accounted investees are those
entities in which the Group has significant influence, but not control or joint control over the financial and operating policies.
The material accounting policies adopted are set out in the following pages.
1.3 Financial instruments
1.3.1 Amortised cost and effective interest rate
Interest income and expense is recognised using the effective interest method, by reference to the principal outstanding and the
effective interest rate applicable, which is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the instrument or, when appropriate, a shorter period to that instrument’s gross carrying amount. When calculating
the effective interest rate, the Group estimates cash flows considering all contractual terms of the instrument but not future credit
losses. The calculation includes payments and receipts that are an integral part of the effective interest rate, transaction costs and all
other discounts or premiums upon initial recognition.
Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial
liability.
The ‘amortised cost’ of a financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or
minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity
amount and, for financial assets adjusted for any expected credit loss allowance.
1.3.2 Interest income
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:
- Financial assets that are not purchased or originated credit-impaired (POCI) but have subsequently become credit-impaired (or
‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the
expected credit loss provision), or
- POCI financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial
asset.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
82
1. MATERIAL ACCOUNTING POLICIES (continued)
1.3 Financial instruments (continued)
1.3.3 Initial Recognition
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instrument. All
loans and advances to customers and to banks are recognised when cash is advanced to borrowers. All purchases and sales of securities
are recognised and derecognised on settlement date, which is the date that an asset is delivered to or by the Group.
1.3.4 Measurement at initial recognition
At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of financial asset or
financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or
issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities
carried at fair value through profit or loss are expensed in profit or loss.
An expected credit loss allowance (ECL) is also recognised after initial recognition for financial assets measured at amortised cost and
investments in debt instruments measured at FVOCI, as described in Note 39.2.1.2, which results in an accounting loss being recognised
in profit or loss when an asset is newly originated.
1.4 Financial Assets
1.4.1 Classification and measurement of financial assets
The Group classifies its financial assets in the following measurement categories:
- Fair value through profit or loss (FVTPL);
- Fair value through other comprehensive income (FVOCI); or
- Amortised cost.
Debt instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans,
government and corporate bonds.
Classification and subsequent measurement of debt instruments depend on:
(i) the Group’s business model for managing the asset; and
(ii) the cash flow characteristics of the asset.
Based on these factors, the Group classifies its debt instruments into one of the following three measurement categories:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of
principal and interest (SPPI) on specified dates, and that are not designated at FVTPL, are measured at amortised cost. The carrying
amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described in Note 39.2.1.1.
Interest income from these financial assets is included in ‘Interest and similar income’ using the effective interest rate method.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and
for selling the assets, where the assets’ cash flows represent solely payments of principal and interest, and that are not designated
at FVTPL, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses on specified dates, interest revenue and foreign exchange gains and losses on the instrument’s
amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss
previously recognised in OCI is reclassified from equity to profit or loss and recognised in ‘Net gain on investment securities and
hedging instruments’. Interest income from these financial assets is included in ‘Interest and similar income’ using the effective
interest rate method.
• Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVTPL.
A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognised
in profit or loss and presented in the statement of profit or loss within ‘Trading profits’ in the period in which it arises, unless it
arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented
separately in ‘Net gain on investment securities and hedging instruments’. Interest income from these financial assets is included
in ‘Interest income’ using the effective interest rate method.
Financial assets and liabilities are designated at fair value through profit or loss on initial recognition where such designation results
in more relevant information because it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes
referred to as an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and
losses on them on different bases.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
83
1. MATERIAL ACCOUNTING POLICIES (continued)
1.4 Financial Assets (continued)
1.4.1 Classification and measurement of financial assets (continued)
Business Model Assessment
The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best
reflects the way the business is managed, and information is provided to management. The information considered includes:
- the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether
management’s strategy focuses on earning contractual interest revenue maintaining a particular interest rate profile, matching the
duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the
sale of the assets;
- how the performance of the portfolio is evaluated and reported to the Group’s management;
- the risks that affect the performance of the business model (and the financial assets held within that business model) and how
those risks are managed;
- the frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about future sales
activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the
Group’s stated objective for managing the financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading and whose performance is evaluated on a fair value basis are measured at FVTPL because
they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets.
Cash flows that represent solely payments of principal and interest
‘Principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time
value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for
other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual
terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing
or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers:
• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and
• features that modify consideration of the time value of money – e.g. periodical reset of interest rates.
Embedded derivatives
Derivatives may be embedded in another contractual arrangement (a host contract). The Group accounts for an embedded derivative
separately from the host contract when:
- the host contract is not an asset in the scope of IFRS 9;
- the host contract is not itself carried at FVTPL;
- the terms of the embedded derivative would meet the definition of a derivative if they were contained in a separate contract; and
- the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks
of the host contract.
Separated embedded derivatives are measured at fair value, with all changes in fair value recognised in profit or loss unless they form
part of a qualifying cash flow or net investment hedging relationship. Separated embedded derivatives are presented in the statement
of financial position together with the host contract.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is instruments that do not
contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. Examples of equity instruments
include basic ordinary shares.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent
changes in fair value in OCI. This election is made on an investment-by-investment basis and is irrevocable. Other equity instruments
are classified as measured at FVTPL.
Gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognised. Dividends are
recognised in profit or loss (see Note 1.25) unless they clearly represent a recovery of part of the cost of the investment, in which
case they are recognised in OCI. Cumulative gains and losses recognised in OCI are transferred to retained earnings on disposal
of an investment. Gains and losses on equity investments at FVTPL are included in the ‘Trading profits’ line in the statement of profit
or loss.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
84
1. MATERIAL ACCOUNTING POLICIES (continued)
1.4 Financial Assets (continued)
1.4.2 Modification of terms
When modification of a loan agreement occurs as a result of commercial restructuring activity rather than due to the credit risk of
the borrower, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are
substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this
case, the original financial asset is derecognised (see 1.4.4) and a new financial asset is recognised at fair value. If the cash flows of the
modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the
financial asset. In this case, the Group recalculates the gross carrying amount of the financial asset and recognises the amount arising
from adjusting the gross carrying amount as a modification gain or loss in profit or loss.
Additionally, in the case of loans and advances which encountered actual or apparent financial difficulties, the Group may grant a
concession where a customer’s financial difficulty indicates that with the original terms and conditions of the contract satisfactory
repayment may not be possible. Such concessions are recognised as revisions to the expected credit loss on the associated loan.
A concession refers to either of the following:
- a change in the previous terms and conditions of a contract the customer is considered unable to comply with due to its financial
difficulties to allow for sufficient debt service ability, that would not have been granted had the customer not been in financial
difficulties; or
- a total or partial refinancing of a troubled debt contract, that would not have been granted had the customer not been in financial
difficulties.
1.4.3 Impairment
The Group assesses on a forward-looking basis the expected credit losses (‘ECL’) associated with its debt instrument assets carried
at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Group
recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- the time value of money; and
- reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
Note 39.2.1.2 provides more detail of how the expected credit loss allowance is measured.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position as follows:
- financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;
- loan commitments and financial guarantee contracts: as a provision;
- where a financial instrument includes both a drawn and undrawn component, and the Group cannot identify the ECL on the loan
commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both
components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any
excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and
- debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying
amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve.
Measurement of ECL
ECL are a probability-weighted estimate of credit losses. They are measured as follows:
- financial assets that are not credit-impaired at the reporting date: at the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);
- financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the
present value of estimated future cash flows;
- undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group
if the commitment is drawn down and the cash flows that the Group expects to receive; and
- financial guarantee contracts: the present value of the expected payments to reimburse the holder less any amounts that the
Group expects to recover.
Modification of financial assets
When there is a modification of financial assets’ terms (Note 1.4.2), the date of renegotiation is considered to be the date of initial
recognition for impairment calculation purposes including for the purpose of determining whether a significant increase in credit
risk has occurred.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
85
1. MATERIAL ACCOUNTING POLICIES (continued)
1.4 Financial Assets (continued)
1.4.4 Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial assets expire, or when the
group transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial assets are transferred or in which the Group neither transfers nor retains substantially all the risks and
rewards of ownership and it does not retain control of the financial asset.
On derecognition of a financial asset measured at amortised cost, the difference between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset derecognised) and the sum the consideration received (including any new asset
obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or
loss.
1.4.5 Fair valuation of financial assets
Where possible, fair value is based on quoted bid prices in an active market. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If the market
for a financial asset is not active, the Group establishes fair value by using valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that
market participants would take into account in pricing a transaction.
1.5 Financial liabilities
1.5.1 Classification and measurement of financial liabilities
Financial liabilities are classified according to the substance of the contractual arrangements entered into.
Financial liabilities are initially measured at fair value less, in the case of financial liabilities not at fair value through profit or loss, transaction
costs that are directly attributable to their issue. Financial liabilities are subsequently measured at amortised cost using the effective
interest method, except for financial liabilities at fair value through profit or loss, which are measured at fair value.
Financial liabilities at fair value through profit or loss include financial liabilities classified as held for trading and those designated at fair
value through profit or loss upon initial recognition. During the current and the previous year, the Group did not designate any financial
liabilities as at fair value through profit or loss upon initial recognition. Derivatives are categorised as held for trading, unless they are
designated and effective hedging instruments.
Financial liabilities that are measured at amortised cost using the effective interest method include amounts owed to banks, amounts
owed to customers, senior non-preferred liabilities and subordinated liabilities.
The gain or loss on financial liabilities at fair value through profit or loss is recognised in profit or loss. For financial liabilities carried at
amortised cost, the gain or loss is recognised in profit or loss when the financial liability is derecognised and through the amortisation
process whereby any difference between the proceeds net of transaction costs, and the settlement or redemption is recognised over
the term of the financial liability.
Financial liabilities are classified in separate captions of the Statement of Financial Position based on the nature of the instrument
and the counterparty. Financial liabilities where the creditor has a lower priority than others are classified as subordinated liabilities
whilst Senior non-preferred liabilities that fulfil the minimum requirements for own funds and eligible liabilities (MREL) are presented
in a separate caption.
1.5.2 Derecognition of financial liabilities
A financial liability is derecognised when it is extinguished. This occurs when the obligation specified in the contract is discharged,
cancelled or expires.
1.6 Interest rate benchmark reform
The amendments to various standards as a result of the interest rate reform – phase 2 were applied for the first time in 2021.
When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortised cost changed
as a result of interest rate benchmark reform, the Group updated the effective interest rate of the financial asset or financial liability
to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by
interest rate benchmark reform if the following conditions are met:
- the change is necessary as a direct consequence of the reform; and
- the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e. the basis
immediately before the change.
When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual
cash flows required by interest rate benchmark reform, the Group first updated the effective interest rate of the financial asset or
financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on
accounting for modifications to the additional changes.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
86
1. MATERIAL ACCOUNTING POLICIES (continued)
1.7 Financial guarantee contracts and loan commitments
‘Financial guarantees’ are contracts that require the Group to make specified payments to reimburse the holder for a loss that it
incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. ‘Loan
commitments’ are firm commitments to provide credit under pre-specified terms and conditions.
Financial guarantees issued or commitments to provide a loan at a below-market interest rate are initially measured at fair value.
Subsequently, they are measured at the higher of the loss allowance determined in accordance with IFRS 9 and the amount initially
recognised less, when appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS 15.
For financial guarantees issued or commitments the Group recognises a loss allowance.
Impairment allowances and provisions on loan commitments that comprise both a drawn and undrawn commitment are presented in
accordance with the policy set out in the Note 1.4.3 Impairment.
1.8 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Group
currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
1.9 Derivatives held for risk management purposes and hedge accounting
Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or
liabilities. Derivatives held for risk management purposes are measured at fair value in the statement of financial position.
The Group designates certain derivatives held for risk management as well as certain non-derivative financial instruments as hedging
instruments in qualifying hedging relationships. On initial designation of the hedge, the Group formally documents the relationship
between the hedging instrument(s) and hedged item(s), including the risk management objective and strategy in undertaking the
hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an
assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instrument(s) is (are)
expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged item(s) during the
period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125%. For a cash
flow hedge of a forecast transaction, the Group makes an assessment of whether the forecast transaction is highly probable to occur
and presents an exposure to variations in cash flows that could ultimately affect profit or loss.
The Group normally designates a portion of the cash flows of a financial instrument for cash flow or fair value changes attributable to
a benchmark interest rate risk, if the portion is separately identifiable and reliably measurable.
These hedging relationships are discussed below.
Fair value hedges
When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a
firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss.
The change in fair value of the hedged item attributable to the hedged risk is recognised in profit or loss. If the hedged item would
otherwise be measured at cost or amortised cost, then its carrying amount is adjusted accordingly.
If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge
accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. However, if the derivative is
novated to a Central Counterparty Clearing (CCP) by both parties as a consequence of laws or regulations without changes in its terms
except for those that are necessary for the novation, then the derivative is not considered expired or terminated.
Any adjustment up to the point of discontinuation to a hedged item for which the effective interest method is used is amortised to
profit or loss as an adjustment to the recalculated effective interest rate of the item over its remaining life.
On hedge discontinuation, any hedging adjustment made previously to a hedged financial instrument for which the effective interest
method is used is amortised to profit or loss by adjusting the effective interest rate of the hedged item from the date on which
amortisation begins. If the hedged item is derecognised, then the adjustment is recognised immediately in profit or loss when the item
is derecognised.
Other non-trading derivatives
Other non-trading derivatives are recognised on balance sheet at fair value on initial recognition. If a derivative is not held for trading,
and is not designated in a qualifying hedge relationship, then all changes in its fair value are recognised immediately in profit or loss as
a component of trading profits and net income from other financial instruments at FVTPL (refer to Note 5).
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
87
1. MATERIAL ACCOUNTING POLICIES (continued)
1.10 Sale and repurchase agreements
Securities sold subject to a linked repurchase agreement (repos) are retained in the financial statements as financial assets at fair value
through profit or loss or as investment securities as appropriate, and the counterparty liability is included in amounts owed to banks.
Securities purchased under agreements to resell (reverse repos) are not recognised but the amounts paid are recorded as loans and
advances to banks. The difference between sale and repurchase price or purchase and subsequent sale price is recognised over the
life of the repo/reverse repo agreements using the effective interest method and is treated as interest.
1.11 Investments in subsidiaries and equity-accounted investees
Investments in subsidiaries and equity-accounted investees are initially included in the Bank’s statement of financial position at cost
and subsequently at cost less any impairment loss which may have arisen. Interest in equity-accounted investees are accounted for
using the equity method at Group level. They are initially recognised at cost, which includes transaction costs. Subsequently, the
consolidated financial statements include the Group’s share of profit or loss and other comprehensive income of equity-accounted
investees, until the date on which significant influence ceases. Dividends from the investments are recognised in the Bank’s profit or
loss when its right to receive dividend is established.
At the end of each reporting period, the Bank reviews the carrying amount of its investments in subsidiaries and equity-accounted
investees to determine whether there is any indication of impairment and if any such indication exists, the recoverable amount of the
asset is estimated.
1.12 Property and equipment
Property and equipment are classified into the following classes – land and buildings, IT infrastructure and equipment and other
(primarily furniture and fittings) and are initially measured at cost.
Subsequent to initial recognition, freehold and long-term leasehold properties are stated in the statement of financial position at
revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent
accumulated impairment losses. Revaluations are performed by professionally qualified architects on a regular basis such that the
carrying amount does not differ materially from that which would be determined using fair values at the end of the reporting period.
Other tangible assets are stated at cost less accumulated depreciation and any accumulated impairment losses.
1.13 Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
1.13.1 Group acting as a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates consideration in the contract
to each lease component on the basis of its relative stand-alone price. However, for leases of branches and office premises, the Group
has elected not to separate non-lease components and accounts for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially
measured at cost. After commencement date, the Group measures its right-of-use asset by applying the cost model and is subsequently
depreciated using the straight-line method from the commencement date to the end of the lease term. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using its incremental borrowing rate. This rate was based on the swap rate curves as proxies for the risk-free rate, the
MGS yield to include the local context and applying a risk margin.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is
remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the
amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase
or extension option is reasonably certain to be exercised or a termination option is reasonably certain to be exercised or a termination
option is reasonably certain not to be exercised.
The Group presents right-of-use assets in ‘property and equipment’ and lease liabilities in ‘other liabilities’ in the statement of financial
position.
1.13.2 Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets (below €5,000) and
short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over
the lease term.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
88
1. MATERIAL ACCOUNTING POLICIES (continued)
1.14 Intangible assets
Intangible assets comprise computer software. In determining the classification of an asset that incorporates both intangible and
tangible elements, judgement is used in assessing which element is more significant. Computer software which is an integral part of
the related hardware is classified as property and equipment and accounted for in accordance with the Group’s accounting policy on
property and equipment. Where the software is not an integral part of the related hardware, this is classified as an intangible asset.
Computer software is externally generated.
Computer software is initially measured at cost. It is subsequently carried at cost less accumulated amortisation and any accumulated
impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates.
1.15 Depreciation and amortisation
Depreciation on property and equipment commence when these assets are available for use and are charged to profit or loss so as
to write off the cost or revalued amount of assets, other than land, less any estimated residual value, over their estimated useful life,
using the straight-line method, on the following bases:
Property and equipment Freehold and long-term leasehold buildings 2% per annum IT infrastructure and equipment 10% - 25% per annum Other (primarily furniture and fittings) 5% - 33% per annum Right-of-use assets Over the life of the lease
The depreciation method applied, the residual value and the useful life are reviewed at the end of each reporting period and adjusted
if appropriate.
Amortisation on intangible assets commence when these assets are available for use and are charged to profit or loss so as to write
off the cost or revalued amount of assets, less any estimated residual value, over their estimated useful life, using the straight line
method, on the following bases:
Intangible assets Computer software 10% - 20% per annum
The amortisation method applied, the residual value and the useful life are reviewed at the end of each reporting period and adjusted
if appropriate.
1.16 Impairment of property and equipment and intangible assets
At the end of each reporting period the Group reviews the carrying amount of its property and equipment and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists the recoverable
amount is estimated in order to determine the extent of the impairment loss and the carrying amount of the asset is reduced to its
recoverable amount in line with IAS 36. An impairment loss is recognised immediately in profit or loss, unless the asset is carried at
a revalued amount, in which case the loss is recognised in other comprehensive income to the extent that it does not exceed the
amount in the revaluation surplus for that asset.
1.17 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle
the present obligation at the end of the reporting period. Refer to note 1.4.3 for ECL related provisions.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and deposits repayable on demand or with a contractual period to maturity of less
than 3 months; advances to banks repayable within 3 months from the date of the advance; balances with the Central Bank of Malta,
excluding reserve deposit requirements, and treasury bills with an original maturity of less than 3 months. Amounts owed to banks
that are repayable on demand or with a contractual period to maturity of less than 3 months and which form an integral part of the
Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statements of cash flow.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
89
1. MATERIAL ACCOUNTING POLICIES (continued)
1.19 Dividends payable
Interim dividends and special dividends approved by the Directors are recognised when paid. Final dividends are recognised as liability
upon approval by the shareholders at the Annual General Meeting. Special dividends may be declared separately from the typical
dividend cycle (interim and final) and are usually a one-off payment distributed to shareholders from the profit of the period and/or
from retained earnings.
1.20 Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or in, its absence, the most advantageous market to which the Group has access
at the date. The fair value of a liability reflects its non-performance risk.
Fair value reflects conditions, including but not limited to liquidity in the market, at a specific date and may therefore differ significantly
from the amounts which will actually be received on the maturity or settlement date. The Bank’s portfolio remains deployed across a
wide spread of holdings of moderate duration debt securities issued by quality, credit rated, sovereign, supranational, corporate and
financial institutions, as further disclosed in Notes 14 and 15 to the financial statements.
The best evidence of fair value of an instrument is a quoted price in an actively traded market for that instrument. The determination
of what constitutes an active market is subjective and requires the collation of data and the exercise of judgement.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis.
The Bank determines whether active market conditions exist by taking into consideration various characteristics, including:
- a significant decline in volume and level of trading activity;
- significant variations in available prices either over time or among market participants;
- the absence of or stale prices;
- unusually wide bid/offer spreads; and
- exceptionally minimal transactions when compared with the quantum of the issue in question.
Where it is concluded that an active market does not exist a valuation technique is used. The latter gives consideration to transaction
prices in inactive markets, however it makes use of other observable market data which include a combination of the following:
- the risk premium of more active instruments of the same issuer, the same type of debt, the same currency and with the same
or similar maturity;
- the spreads payable on Credit Default Swaps of the issuer;
- the risk premium over and above the risk free bonds for similarly rated issuers in the same industry sector;
- yield curve or Discounted Cash Flow (DCF) calculations to maturity using appropriate interest rate/discount factors;
- liquidity adjustments to reflect ability to sell asset over a reasonable timeframe; and
- other overall reasonableness tests.
The main assumptions and estimates which management considers when using valuation techniques are the likelihood and expected
timing of future cash flows on the instrument, selecting an appropriate discount rate for the instrument and a risk premium. The
valuation techniques used by the Group incorporate all factors that market participants would consider in setting a price and are
consistent with accepted economic methodologies for pricing financial instruments.
1.21 Taxation
Income tax expense comprises current and deferred tax and is recognised in profit or loss, except when it relates to items recognised
in other comprehensive income or directly in equity, in which case it is dealt with in other comprehensive income or in equity, as
appropriate.
Current tax
Current tax is based on the taxable result for the period. The taxable result for the period differs from the result as reported in profit
or loss because it excludes items which are non-assessable or disallowed and it further excludes items that are taxable or deductible
in other periods. Current tax also includes any tax arising from dividends. It is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period, and any adjustments in relation to the prior periods.
Deferred tax
Deferred tax is determined under the liability method in respect of all temporary differences between the carrying amount of an
asset or liability in the financial statements and its tax base. Deferred tax liabilities are generally recognised for all taxable temporary
differences subject to certain exceptions and deferred tax assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be utilised.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
90
1. MATERIAL ACCOUNTING POLICIES (continued)
1.21 Taxation (continued)
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled
based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is not recognised for temporary differences related to investments in subsidiaries to the extent that it is probable that
they will not reverse in the foreseeable future.
1.22 Revenue recognition
Revenue is recognised to the extent that it is probable that future economic benefits will flow to the Group and these can be measured
reliably. The following specific recognition criteria must also be met before revenue is recognised.
Dividend income from investments is recognised when the right to receive payment has been established.
Interest income and expense is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the
instrument or, when appropriate, a shorter period to that instrument’s net carrying amount. When calculating the effective interest
rate, the Group estimates cash flows considering all contractual terms of the instrument but not future credit losses. The calculation
includes payments and receipts that are an integral part of the effective interest rate, transaction costs and all other discounts or
premiums.
Generally, fee and commission income, is recognised as the related services are performed.
A contract with a customer that results in a recognised financial instrument in the Group’s financial statements may be partially in the
scope of IFRS 9 and partially in the scope of IFRS 15. If this is the case, then the Group first applies IFRS 9 to separate and measure
the part of the contract that is in the scope of IFRS 9 and then applies IFRS 15 to the residual.
Other fee and commission expenses are expensed as the services are received.
1.23 Foreign currency translation
For the purpose of the consolidated and separate financial statements, the presentation currency is the Euro. The functional currency
of the Bank and of all its subsidiaries is the Euro.
In preparing the financial statements of the individual group entities, transactions denominated in currencies other than the functional
currency are translated at the exchange rates ruling on the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are translated to Euro at the rates of exchange ruling at the end of the reporting period. Gains and losses
arising from such translation are dealt with in profit or loss and presented with trading income. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated to Euro at the exchange rate ruling on the date the fair
value was measured. Non-monetary assets and liabilities denominated in foreign currencies that are measured in terms of historical
cost are not retranslated.
1.24 Employee benefits
The Group and the Bank contribute towards the state pension in accordance with local legislation. The only obligation of the Group
and the Bank is to make the required contribution. Costs are expensed in the period in which they are incurred in profit or loss.
1.24.1 Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be
paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee
and the obligation can be estimated reliably.
1.24.2 Defined contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided and recognised in Employee
compensation and benefits in the Statement of Profit or Loss. Prepaid contributions are recognised as an asset to the extent that a
cash refund or a reduction in future payments is available.
1.24.3 Defined benefit plans
For the Group’s and the Bank’s defined benefit plans, the cost of providing benefits is determined using the projected unit credit
method, with estimations being carried out at each reporting date. Past service cost is recognised as an expense at the earlier of the
following dates (a) when the plan amendment or curtailment occurs and (b) when the entity recognises related restructuring costs
or termination benefits. The amount recognised in the Statement of Financial Position represents the present value of the expected
future payments required to settle the obligation resulting from employee service in the current and prior periods.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
91
1. MATERIAL ACCOUNTING POLICIES (continued)
1.24 Employee benefits (continued)
1.24.3 Defined benefit plans (continued)
The service cost and the net interest on the net defined benefit liability are recognised in profit or loss. Remeasurements of the net
defined benefit liability, comprising actuarial gains and losses are recognised in other comprehensive income and are not reclassified
to profit or loss in a subsequent period. Such remeasurements are recognised immediately in retained earnings. Actuarial gains and
losses are changes in the present value of the defined benefit obligation resulting from experience adjustments and the effects of
changes in actuarial assumptions. Actuarial assumptions are an entity’s best estimates of the variables that will determine the ultimate
cost of providing post-employment benefits. Due to the nature of the actuarial assumptions, in accordance with the provisions of IAS
19, Employee Benefits, the Group and the Bank did not involve a qualified actuary in the measurement of their post-employment
benefit obligations.
1.24.4 Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when
the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting
date, then they are discounted.
1.25 Judgements in applying accounting policies and key sources of estimation uncertainty
The amounts recognised in the financial statements are sensitive to the accounting policies, assumptions and estimates that underlie
the preparation of financial statements. The judgements made by management in applying the Group’s and the Bank’s accounting
policies that have the most significant effect on the amounts recognised in the financial statements, together with information about
the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period have
been disclosed in the financial statements.
1.25.1 Credit Impairment
Estimates and underlying assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are either disclosed below or in Note 39.2.1.2.5. This discloses the determination of inputs
in the IFRS 9 ECL measurement model, including key assumptions used in incorporation of forward-looking information.
1.25.2 Fair value of financial instruments not quoted in active markets
The fair value of financial instruments that are not quoted in active markets is determined by using valuation techniques. Periodically, the
Group calibrates these valuation techniques and tests them for validity. Where possible the valuation techniques used by the Group
make use of observable data and incorporate all factors that market participants would consider in setting a price and are consistent
with accepted economic methodologies for pricing financial instruments. Management is required to make certain assumptions and
estimates in arriving at an appropriate fair value, based on available observable market data. A change in assumptions could affect the
reported fair value of these financial instruments. Further disclosures are provided in Note 39.
1.25.3 Fair value of land and buildings
The fair value of the Group’s and the Bank’s land and buildings is determined by using valuation techniques as further disclosed in
Note 21. In arriving at an estimate of fair value at the end of the reporting period, the Group and the Bank make use of significant
unobservable inputs. A change in such inputs could affect the reported fair value of these land and buildings.
1.25.4 Classification of facilities as forborne
Management follows the European Banking Authority technical standard in identifying performing/non-performing exposures and in
determining forborne exposures. Judgement is exercised in determining whether the modification of the original terms of a facility are
granted, because of financial difficulties, which would result in the exposure being classified as forborne.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
92
2. INTEREST AND SIMILAR INCOME
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000On loans and advances to banks 3,674 946 3,674 946 On loans and advances to customers 234,458 191,602 234,458 191,602 On balances with Central Bank of Malta 84,009 3,638 84,009 3,638 On treasury bills 1,263 91 1,263 91 323,404 196,277 323,404 196,277 On debt, other fixed income instruments and derivatives- fair value through other comprehensive income 4,906 5,328 4,906 5,328 - amortised cost 64,406 29,855 64,406 29,855 - fair value through profit or loss 30 3,139 30 3,139 - interest rate swaps 1,773 - 1,773 - 71,115 38,322 71,115 38,322 Amortisation of discounts and premiums- fair value through other comprehensive income (1,003) (1,192) (1,003) (1,192)- amortised cost 7,886 (13,197) 7,886 (13,197)6,883 (14,389) 6,883 (14,389)Net interest income on debt and other fixed income instruments using the effective interest rate method 77,998 23,933 77,998 23,933 401,402 220,210 401,402 220,210
3. INTEREST EXPENSE The Group The Bank2023 2022 2023 2022€000 €000 €000 €000On amounts owed to banks 4,791 599 4,791 599 On interest rate swaps - 2,811 - 2,811 On amounts owed to customers 3,162 6,140 3,162 6,140 On debt securities in issue 35,669 2,534 35,669 2,534 On subordinated liabilities 5,781 5,781 5,781 5,781 Negative interest on loans to banks, treasury bills and balances with Central Bank of Malta - 446 - 446 49,403 18,311 49,403 18,311
4. NET FEE AND COMMISSION INCOME
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000On loans and advances, similar activities and local business 48,044 44,035 48,085 44,096 On life assurance, fund management and similar activities 20,463 22,692 12,230 13,512 On other activities 9,540 9,841 9,540 9,841 78,047 76,568 69,855 67,449
The fees and commission presented in this note include income of €33.4 million (2022: €30.0 million) relating to financial assets and
financial liabilities not measured at FVTPL.
A significant portion of the fees and commissions earned by the Group are recognised at the point in time when the transaction takes
place. These include service charges, processing fees and card related income.
The other fee and commission income earned from contracts with customers is measured based on the consideration specified in the
contract with a customer. The Group recognises revenue over time as the services are provided.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
93
5. TRADING PROFITS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Net income on foreign exchange activities 4,945 8,630 4,939 8,663 Fair value movements and net gains on sale of financial instruments designated at fair value through profit or loss 3,255 5,530 3,250 5,540 Fair value movements and net gains on sale of financial instruments mandatorily measured at fair value through profit or loss 5 3 5 3 8,205 14,163 8,194 14,206
6. NET GAIN ON INVESTMENTS AND HEDGING INSTRUMENTS The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Amortised cost instruments- net loss on disposal (2) (4) (2) (4)(2) (4) (2) (4)Financial assets at FVOCI - debt instruments- net gain on disposal 83 - 83 - - net revaluation loss attributable to hedged risk (479) (10,451) (479) (10,451)(396) (10,451) (396) (10,451)Derivative financial instruments- net gain on derivative financial instruments held for hedging 409 10,541 409 10,541 11 86 11 86
7. EMPLOYEE COMPENSATION AND BENEFITS The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Employee compensation and benefits- wages and salaries 88,984 78,037 86,531 75,839 - social security costs 5,168 5,010 5,016 4,869 - retirement benefits 5,945 7,380 5,945 7,380 - contribution plan benefits 1,507 860 1,460 841 - other staff costs 9,457 8,746 9,442 8,730 111,061 100,033 108,394 97,659 The average number of employees are analysed as follows:Managerial 899 873 876 851 Supervisory and clerical 1,133 1,137 1,102 1,108 Others 73 72 68 61 2,105 2,082 2,046 2,020
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
94
8. NET IMPAIRMENT REVERSAL8.1 The Group The BankNote 2023 2022 2023 2022€000 €000 €000 €000Loans and advances to customers- increase in expected credit losses (57,961) (41,002) (57,961) (41,002)- bad debts written off (7,345) (11,383) (7,345) (11,383)(65,306) (52,385) (65,306) (52,385)Loans and advances to customers- decrease in expected credit losses 58,604 85,658 58,604 85,658 - recoveries of amounts previously written off 3,694 15,149 3,694 15,149 62,298 100,807 62,298 100,807 Net impact from Non-Performing Loans (‘NPL’) sale 8.2 17,533 - 17,533 - Investments- (increase)/decrease in expected credit losses (320) 653 (320) 653 - write off (3,724) - (3,724) - Net impairment reversal 10,481 49,075 10,481 49,075
Net impairment reversal for the year includes post-model adjustment reversal of €18.2 million (2022: Net impairment reversal €38.2
million) (Note 39.2.1.2.5).
8.2 NPL Sale derecognition and write-offs
During the year ended 31 December 2023, the Group has entered into an assignment agreement (the “Assignment”) pursuant to
which it has assigned its rights, title, interest, and benefits to the portfolio of long-standing non-performing loans (“the Portfolio”)
to a third-party acquirer (the “Acquirer”) for a consideration of €26.0 million (the “Transaction”). Most of the Portfolio comprised
of commercial loans across a number of different industries although it also included retail exposures. The consideration reflects,
amongst other things, the reduced creditworthiness of the underlying borrowers, the recovery risk inherent in the Portfolio and the
cost to acquire and manage the Portfolio over the recovery period.
The primary purpose of the transaction is to generate income from non-performing loans (“NPLs”) which may have either been
completely written off or provided for, in large part, in previous years. The net book value of the Portfolio, as at the last reporting
date, December 2022, was €8.5 million, representing €41.3 million in gross carrying amount less €32.8 million in expected credit
losses. In this regard, the Transaction has a net positive impact of €17.5 million on the Group’s and Bank’s profitability for the financial
year 2023, representing the difference between the accumulated expected credit losses and the actual realised loss following the
Transaction. The sale also included off-balance sheet amounts which had been written-off in previous years.
Refer to Notes 39.2.2.1 and 39.2.2.2 for further detail relating to the derecognition of the principal balances and the release of
Expected Credit Losses in relation to the NPL transaction.
9. PROFIT BEFORE TAX The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Profit before tax is stated after charging:Total remuneration payable to the external auditors of the parentcompany inclusive of VAT- the audit of financial statements 967 878 923 836 - other assurance services 114 404 100 388 - tax advisory services 6 14 5 8 - other non-audit services 27 73 27 73 1,114 1,369 1,055 1,305
Directors' emoluments:- fees 443 474 425 443 - directors' salaries as full-time bank employees512 880 512 880 955 1,354 937 1,323 Compensation to other key management personnel is analysed as follows:- other fees 112 106 - - - short term employee benefits1,575 1,647 1,554 1,619 - post employment benefits 21 12 21 12 - termination benefits745 - 745 - 2,453 1,765 2,320 1,631 Total remuneration of directors and other key management 3,408 3,119 3,257 2,954 personnel
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
95
10. INCOME TAX EXPENSE
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Through profit and loss Current 49,911 (539) 50,997 402 Deferred 33,766 18,086 33,828 18,112 83,677 17,547 84,825 18,514
The charge for income tax is based on the taxable profit for the period at a rate of 35%. The income tax expense and the product
of accounting profit multiplied by the statutory domestic income tax rate are reconciled as follows:
The Group The Bank2023 2022 2023 2022restated€000 €000 €000 €000Profit before tax 251,613 49,075 244,100 50,921 Tax at the applicable rate of 35% 88,065 17,176 85,435 17,822 Tax effect of:Exempt and untaxed dividends (120) (112) (192) (505)Share of results of equity-accounted investees (3,864) (776) - - Withholding tax on property sales (259) (101) (259) (101)Depreciation on premises 624 906 624 906 Non-deductible expenses (1) 13 (1) 13 Other differences (768) 441 (782) 379 Income tax expense 83,677 17,547 84,825 18,514 Other comprehensive income- current 479 - 479 - - deferred 488 (1,084) 488 (1,084)967 (1,084) 967 (1,084)
The credit in the current tax through other comprehensive Income is offset by the current tax expense in profit or loss.
11. EARNINGS PER SHARE The Group The Bank2023 2022 2023 2022restatedcents per cents per cents per cents per shareshareshareshareEarnings per share 28.8c 5.4c 27.3c 5.6c
The earnings per share for the Group and Bank have been calculated on the profits of the Group and the Bank, as shown in the
statements of profit or loss, divided by number of shares in issue.
Earnings per share was calculated on profit attributable to shareholders of the Group of €167,936,000 (2022 restated: €31,528,000)
and the Bank €159,275,000 (2022: €32,407,000) divided by 583,849,270 shares outstanding as at 31 December 2023.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
96
12. DIVIDENDS
The amounts of dividends recognised as distributions to equity holders during the period, and the related amount per qualifying
share, are as follows:
The Bank2023 2022 2023 2022cents per cents per €000 €000share share Gross of income tax - interim dividend 4.62 - 26,974 - 4.62 - 26,974 - Net of income tax - interim dividend 3.00 - 17,533 - 3.00 - 17,533 -
During the comparative year, the Directors did not declare any dividends.
In the current period, the Directors authorised an interim cash ordinary dividend of €0.0462 gross per share amounting to €27.0
million (net ordinary dividend of €0.0300 per share amounting to €17.5million) to be paid to shareholders. Payment was affected in
the current period on 6 December 2023. Dividend was paid out of profits taxed at 35%.
The Directors have approved a proposal to shareholders of a final cash ordinary dividend of gross €0.0700 per share amounting to
€40.9 million (net dividend of €0.0455 per share - €26.6 million) be paid to shareholders.
The payment of this dividend is subject to regulatory approval and to approval by shareholders at the Annual General Meeting and
has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders on the register
of members as at the “record date”. The record date for the purposes of Article 2.1 of the Bank’s Articles of Association is 30 days
immediately preceding the date set for the Annual General Meeting.
13. BALANCES WITH CENTRAL BANK OF MALTA, TREASURY BILLS AND CASH
The Group The BankNote 2023 2022 2023 2022€000 €000 €000 €000Balances with Central Bank of Malta 2,277,670 3,065,473 2,277,670 3,065,473 Malta Government Treasury Bills - 238,028 - 238,028 Cash 36 75,647 85,760 75,647 85,760 2,353,317 3,389,261 2,353,317 3,389,261
Balances with Central Bank of Malta include Reserve Deposit, in terms of Regulation (EC) No. 1745/2003 of the European Central
Bank amounting to €119.4 million (2022: €124.5 million) in respect of both the Group and the Bank. During the second half of
the comparative year 2022, Balances with Central Bank of Malta and Malta Government Treasury Bills were no longer subject to a
negative interest following the increase in interest rates.
The Group and Bank did not hold any Malta Government Treasury Bills as at the end of 2023.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
97
14. DERIVATIVE LIABILITIES HELD FOR RISK MANAGEMENT
Financial assets at fair value through profit or loss The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Financial assets mandatorily measured at FVTPL:Debt and other fixed income instruments (note 14.1) 21 26 21 26 Derivative financial instruments (note 14.3) 7,922 28,866 7,922 28,866 7,943 28,892 7,943 28,892 Financial assets designated at FVTPL:Debt and other fixed income instruments (note 14.1) 21 1,046 21 1,046 Equity and other non-fixed income instruments (note 14.2) 40,584 37,700 40,293 37,548 Loans and advances to customers (note 17) 65,305 78,725 65,305 78,725 105,910 117,471 105,619 117,319 113,853 146,363 113,562 146,211 Financial liabilities at fair value through profit or lossFinancial liabilities classified as held for trading:Derivative financial instruments (note 14.3) 4,154 4,535 4,154 4,535
14.1 Debt and other fixed income instruments
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Issued by public bodies- local general government - 1,040 - 1,040 - foreign general government 15 10 15 10 15 1,050 15 1,050 Issued by other issuers- foreign banks27 22 27 22 27 22 27 22 42 1,072 42 1,072 Listing status- listed on Malta Stock Exchange - 1,040 - 1,040 - listed elsewhere42 32 42 32 42 1,072 42 1,072 Summary of movements during the year:At the beginning of the year 1,072 1,148 1,072 1,148 Movement in accrued interest receivable (27) 1 (27) 1 Redemptions (1,000) - (1,000) - Movement in fair value (1) (77) (1) (77)Exchange adjustment(2) - (2) - At the end of the year42 1,072 42 1,072
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
98
14. DERIVATIVE LIABILITIES HELD FOR RISK MANAGEMENT (continued)
14.2 Equity and other non-fixed income instruments
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Issued by other issuers- local banks 203 183 203 183 - foreign other 39,877 37,147 39,878 37,147 - local other 504 370 212 218 40,584 37,700 40,293 37,548 Listing status- listed on Malta Stock Exchange 707 554 415 402 - foreign unlisted 39,877 37,146 39,878 37,146 40,584 37,700 40,293 37,548 Summary of movements during the year:At the beginning of the year 37,700 31,784 37,548 31,621 Acquisitions 129 63 - 63 Disposals (201) - (201) - Movement in fair value 3,639 4,605 3,629 4,616 Exchange adjustment (683) 1,248 (683) 1,248 At the end of the year 40,584 37,700 40,293 37,548
14.3 Derivative financial instruments
Fair value of assets 7,922 28,866 7,922 28,866 Fair value of liabilities 4,154 4,535 4,154 4,535 The above comprise over-the-counter forward exchange contracts and interest rate swaps that have not been designated as hedging instruments stated at fair value, with notional amounts analysed with remaining life as follows:- less than 3 months 263,131 126,317 263,131 126,317 - between 3 months and 1 year 119,358 452,615 119,358 452,615 - more than 1 year 132,560 194,429 132,560 194,429 515,049 773,361 515,049 773,361
Derivative financial instruments include offset amounts (refer to Note 39.8).
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
99
15. INVESTMENTS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Debt and other fixed income instruments- measured at FVOCI (note 15.1) 75,951 82,210 75,951 82,210 - measured at amortised cost (note 15.2) 5,266,958 4,467,433 5,266,958 4,467,433 Equity and other non-fixed income instruments (note 15.3)- measured at FVOCI 10,553 17,421 10,553 17,421 5,353,462 4,567,064 5,353,462 4,567,064
Investments with a nominal value of €630.1 million (2022: €640.1 million) have been pledged against the provision of credit lines by
the Central Bank of Malta. Investments were valued at €649.9 million as at 31 December 2023 (2022: €664.0 million).
Investments with a nominal value of €40.0 million (2022: €40.0 million) have been pledged in favour of Depositor Compensation
Scheme. Investments were valued at €40.2 million as at 31 December 2023 (2022: €40.3 million).
Investments with a nominal value of €295.1 million (2022: €32.0 million) have been pledged which are covered by the TBMA/ISMA
Global Repurchase Master Agreement (refer to Note 39.5). Investments were valued at €296.7 million as at 31 December 2023
(2022: €30.9 million).
15.1 Debt and other fixed income instruments measured at FVOCI
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Issued by public bodies- local general government 13,418 15,926 13,418 15,926 - local public sector 62,533 66,284 62,533 66,284 75,951 82,210 75,951 82,210 Listing status- listed on Malta Stock Exchange 75,951 82,210 75,951 82,210 75,951 82,210 75,951 82,210 Summary of movements during the year:At the beginning of the year 82,210 106,327 82,210 106,327 Movement in interest receivable accrued (94) (81) (94) (81)Redemptions and disposals (3,072) (14,333) (3,072) (14,333)Movement in fair value (692) (14,102) (692) (14,102)Loss on disposal (51) - (51) - Impairment reversal 21 14 21 14 Exchange adjustment (2,371) 4,385 (2,371) 4,385 At the end of the year 75,951 82,210 75,951 82,210
As at 31 December 2023 the loss allowance on Debt Instruments at FVOCI amounts to €20,536 (2022: €21,367).
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
100
15.2 Debt and other fixed income instruments measured at amortised cost
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Issued by public bodies- local general government 1,640,030 1,175,138 1,640,030 1,175,138 - foreign general government 2,312,296 2,418,976 2,312,296 2,418,976 3,952,326 3,594,114 3,952,326 3,594,114 Issued by other issuers- foreign banks 1,207,968 743,253 1,207,968 743,253 - foreign other 106,084 127,628 106,084 127,628 - other local 580 2,438 580 2,438 1,314,632 873,319 1,314,632 873,319 5,266,958 4,467,433 5,266,958 4,467,433 Listing status- listed on Malta Stock Exchange 1,640,611 1,177,576 1,640,611 1,177,576 - listed elsewhere 3,495,976 3,090,750 3,495,976 3,090,750 - foreign unlisted 130,371 199,107 130,371 199,107 5,266,958 4,467,433 5,266,958 4,467,433
At 31 December 2023, the fair value of debt and other fixed income instruments measured at amortised cost, without deducting
transaction costs, amounted to €5,104.5 million (2022: €4,094.4 million).
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Summary of movements during the year:At the beginning of the year 4,467,433 3,443,199 4,467,433 3,443,199 Movement in interest receivable accrued 19,359 4,324 19,359 4,324 Acquisitions 1,876,446 1,535,766 1,876,446 1,535,766 Redemptions (1,096,636) (498,205) (1,096,636) (498,205)Write-offs (5,000) - (5,000) -Amortisation 7,886 (13,197) 7,886 (13,197)Realised loss on disposals (2) (4) (2) (4)Impairment loss (330) 64 (330) 64 Exchange adjustment (2,198) (4,514) (2,198) (4,514)At the end of the year 5,266,958 4,467,433 5,266,958 4,467,433
15.3 Equity and other non-fixed income instruments measured at FVOCI
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Issued by other issuers- local other 8,097 16,096 8,097 16,096 - foreign other 1,376 - 1,376 - - local banks 40 91 40 91 - local public1,040 1,234 1,040 1,234 10,553 17,421 10,553 17,421 Listing status- listed on Malta Stock Exchange 9,177 17,421 9,177 17,421 -foreign listed1,376 - 1,376 - 10,553 17,421 10,553 17,421 Summary of movements during the year:At the beginning of the year 17,421 19,143 17,421 19,143 Acquisitions 1,276 - 1,276 - Disposals (7,897) - (7,897) - Movement in fair value(247) (1,722) (247) (1,722)At the end of the year10,553 17,421 10,553 17,421
15. INVESTMENTS (continued)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
101
16. LOANS AND ADVANCES TO BANKS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Repayable on call and at short notice 128,151 308,922 128,151 308,922 Term placements with other banks 68,156 83,657 68,156 83,657 Cheques in course of collection - 1,967 - 1,967 196,307 394,546 196,307 394,546
Balances with a carrying amount of €4.3 million (2022: €2.0 million) were held as collateral against derivative contracts.
17. LOANS AND ADVANCES TO CUSTOMERS The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Repayable on call and at short notice 507,481 475,245 507,481 475,245 Term loans and advances 5,710,654 5,217,748 5,710,654 5,217,748 6,218,135 5,692,993 6,218,135 5,692,993 Less impairment losses (103,546) (132,917) (103,546) (132,917)Net loans and advances at amortised cost 6,114,589 5,560,076 6,114,589 5,560,076 Loans and advances designated at fair value through profit or loss (note 14) 65,305 78,725 65,305 78,725 Total loans and advances 6,179,894 5,638,801 6,179,894 5,638,801 Expected credit loss allowances 103,546 132,917 103,546 132,917 103,546 132,917 103,546 132,917
18. INVESTMENTS IN EQUITY-ACCOUNTED INVESTEES
The Group The Bank2023 2022 2023 2022restated€000 €000 €000 €000At the beginning of the year 100,206 99,735 72,870 72,870 Share of results, net of tax 11,030 2,217 - - Dividend received (1,138) (1,746) - - At the end of the year 110,098 100,206 72,870 72,870 Amounts include:Local listed 27,412 24,234 22,304 22,304 Local unlisted 82,686 75,972 50,566 50,566 110,098 100,206 72,870 72,870
On the historical cost basis, shares in equity-accounted investees of the Group, would have been included at a cost of €72.9 million
(2022: €72.9 million).
The fair value of the equity-accounted investees that is publicly quoted amounted to €42.9 million (2022: €45.7 million) at 31
December 2023. The cost of this investment is €22.3 million (2022: €22.3 million).
The fair value of the publicly quoted investee is calculated using observable inputs and is regarded as Level 1 under the fair value
hierarchy of IFRS 13.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
102
18. INVESTMENTS IN EQUITY-ACCOUNTED INVESTEES (continued)
18.1 Details of associates
Details of the associates held by the Group and the Bank are as follows:
Equity Interest Class Incorporated in Nature of Business2023 2022 Name of company % % MAPFRE Middlesea p.l.c. 31.08 31.08 Ordinary Malta Insurance MAPFRE MSV Life p.l.c.* 50.00 50.00 Ordinary Malta Life AssuranceGroup's share of results2023 2022restated Name of company €000 €000 MAPFRE Middlesea p.l.c. 4,316 1,039 MAPFRE MSV Life p.l.c.6,714 1,178 11,030 2,217
*A further 15.54% (2022:15.54%) is held indirectly via another equity-accounted investee. Although the Bank has an effective
participating interest of 65.54% (2022: 65.54%), it does not exercise control over the financial and operating decisions of the associate
as it only has the right for equal representation on the Board of Directors of the associate together with the other shareholders.
Furthermore, as from 1 October 2011 the Bank is deemed to exercise significant influence on MAPFRE MSV Life p.l.c. as opposed
to joint control as a result of a shareholders’ agreement which gives the other shareholder control and as from the financial year 30
September 2012 it is being treated as an equity-accounted investee.
The financial statements of the equity-accounted investees are prepared to 31 December. The registered addresses of the associates
are as follows:
MAPFRE Middlesea p.l.c. Middlesea House, Floriana FRN 1442, Malta
MAPFRE MSV Life p.l.c. The Mall, Mall Street, Floriana FRN 1470, Malta
Summarised financial information extracted from the published preliminary statement of annual results of the associates as at 31
December 2023 in respect of the equity-accounted investees:
2023 2022restated€000 €000Total assets 2,413,265 2,370,347 Total liabilities 2,242,402 2,212,022 Revenues 140,581 131,407 Profit for the year 15,943 5,615 Other Comprehensive Income219 (713) The Group2023 2022restated€000 €000Share of net assets of equity-accounted investees110,098 100,206 Share of results of equity-accounted investees 11,030 2,217
The share of results of equity-accounting investees, net of tax in the Statement of Profit or Loss includes both the profit and other
comprehensive income components of the associates.
The carrying amount of the equity-accounted investees is equal to the equity interest of the Bank in the net assets of the respective
investees.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
103
18. INVESTMENTS IN EQUITY-ACCOUNTED INVESTEES (continued)
18.2 Key judgements made by equity-accounted investees
The associates of the Group have applied IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments for the first time on 1 January
2023. These standards have brought significant changes to the accounting for insurance and reinsurance contracts and financial
instruments and have had a material impact on the associates consolidated financial statements in the period of initial application.
The Associates make estimates and assumptions concerning the future. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The below notes present information about judgements made in applying accounting policies that have the most significant effects
on the amounts recognised in the associates’ financial statements.
Long-term contracts - Insurance contract assets, insurance contract liabilities and reinsurance contract liabilities
Insurance contract assets, insurance contract liabilities and reinsurance contract liabilities are subject to an annual valuation using
generally accepted accounting and actuarial practice.
Different principles and valuation methodologies are adopted depending on the type and generation of products. The key assumptions
used in determining the measurement of insurance contract assets, insurance contact liabilities and reinsurance contract liabilities with
DPF are described in Note 24 of the financial statements of MAPFRE Middlesea p.l.c.
Short-term business insurance contract - liabilities for incurred claims
Liability of incurred claims (LIC) of short-term business insurance contracts, measured under the PAA model, comprise of the estimates
of future cash flows. The estimates of future cash flows is derived using a standard actuarial claims projection technique, the Chain
Ladder method, other than for the claims reserves as explained below. The key assumptions underlying this technique is that past
claims development experience can be used to project future claims development.
Claims reserves which are not projected using actuarial techniques, particularly those involving fatalities and/or serious bodily injuries,
are reserved at the case-by-case reserve estimate. The measurement of claim payments due by the Group involves the assessment
of future settlements and is therefore dependent on assumptions around determining such reserves based on, among others, legal
precedent and current trends in compensation awards.
More detail on the key assumptions used in determining the LIC in respect of short-term insurance contracts under PAA are described
in Note 24 to the financial statements of MAPFRE Middlesea p.l.c.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
104
19. INVESTMENTS IN SUBSIDIARY COMPANIES
Equity interest Class Incorporated in Nature of Business2023 2022Name of company % %BOV Asset Management Limited 100 100 Ordinary Malta Fund ManagementBOV Fund Services Limited 100 100 Ordinary Malta Fund Administration The Bank2023 2022Name of company €000 €000BOV Asset Management Limited 5,481 5,481 BOV Fund Services Limited 749 749 Cost/Carrying amount 6,230 6,230
The registered address of the above unlisted undertakings is as follows:
BOV Asset Management Limited 58, Triq San Zakkarija, Il-Belt Valletta VLT1130
BOV Fund Services Limited 58, Triq San Zakkarija, Il-Belt Valletta VLT1130
All subsidiaries prepared their financial statements to the same date, 31 December.
20. INTANGIBLE ASSETS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000SoftwareCost 1 January 112,924 105,467 112,624 105,467 Additions 12,386 11,834 12,386 11,534 Assets retired from active use (5,772) (4,377) (5,772) (4,377)31 December 119,538 112,924 119,238 112,624 Accumulated amortisation1 January 56,877 49,393 56,788 49,393 Charge for the year 13,791 11,861 13,691 11,772 Accumulated amortisation on assets retired from active use (5,772) (4,377) (5,772) (4,377)31 December 64,896 56,877 64,707 56,788 Carrying amount at 31 December 54,642 56,047 54,531 55,836 Future capital expenditure:- contracted but not provided for in the financial statements 321 329 321 329 - authorised by the directors but not contracted 10,481 34,190 10,481 34,190
 
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
105
21. PROPERTY AND EQUIPMENT
Reconciliation of Carrying Amount
Land and IT infrastructure Other Totalbuildingsand equipmentThe Group €000 €000 €000 €000Cost or valuationBalance at 1 January 2022 133,191 32,956 25,539 191,686 Additions 3,718 1,312 1,660 6,690 Assets retired from active use (68) (2,278) (481) (2,827)Disposals (1) - (89) (90)Revaluation 3,365 - - 3,365 Balance at 31 December 2022 140,205 31,990 26,629 198,824 Balance at 1 January 2023 140,205 31,990 26,629 198,824 Additions 2,825 1,066 3,549 7,440 Transfer from Assets held for realisation 177 - - 177 Assets retired from active use (285) (716) (436) (1,437)Disposals (2,551) - (208) (2,759)Revaluation 4,255 - - 4,255 Balance at 31 December 2023 144,626 32,340 29,534 206,500 Accumulated depreciationBalance at 1 January 2022 20,809 21,679 18,576 61,064 Depreciation for the year 2,721 3,481 1,575 7,777 Accumulated depreciation on assets retired from active use (68) (2,159) (481) (2,708)Balance at 31 December 2022 23,462 23,001 19,670 66,133 Balance at 1 January 2023 23,462 23,001 19,670 66,133 Depreciation for the year 2,605 3,162 1,622 7,389 Accumulated depreciation on assets retired from active use (285) (16) (320) (621)Disposals (448) - (125) (573)Balance at 31 December 2023 25,334 26,147 20,847 72,328 Carrying amount at:Balance at 31 December 2022 116,743 8,989 6,959 132,691 Balance at 31 December 2023 119,292 6,193 8,687 134,172
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
106
21. PROPERTY AND EQUIPMENT (continued)
Reconciliation of carrying amount (continued)
As at 31 December 2023, Property and Equipment includes right-of-use assets of €6.6 million (2022: €8.6 million) related to office
premises and motor vehicles (note 22).
IT Land and infrastructure Other Totalbuildingsand equipmentThe Bank €000 €000 €000 €000Cost or valuationBalance at 1 January 2022 133,153 32,250 23,679 189,082 Additions 3,718 1,302 1,660 6,680 Assets retired from active use (68) (2,278) (435) (2,781)Disposals (1) - (89) (90)Revaluation 3,365 - - 3,365 Balance at 31 December 2022 140,167 31,274 24,815 196,256 Balance at 1 January 2023 140,167 31,274 24,815 196,256 Additions 2,821 1,062 3,549 7,432 Transfer from Assets held for realisation 177 - - 177 Assets retired from active use (285) (716) (391) (1,392)Disposals (2,551) - (208) (2,759)Revaluation 4,255 - - 4,255 Balance at 31 December 2023 144,584 31,620 27,765 203,969 Accumulated depreciationBalance at 1 January 2022 20,742 20,763 17,093 58,598 Depreciation for the year 2,722 3,432 1,562 7,716 Accumulated depreciation on assets retired from active use (68) (2,160) (435) (2,663)Balance at 31 December 2022 23,396 22,035 18,220 63,651 Balance at 1 January 2023 23,396 22,035 18,220 63,651 Depreciation for the year 2,605 3,120 1,617 7,342 Accumulated depreciation on assets retired from active use (285) (17) (274) (576)Disposals (448) - (125) (573)Balance at 31 December 2023 25,268 25,138 19,438 69,844 Carrying amount at:Balance at 31 December 2022 116,771 9,239 6,595 132,605 Balance at 31 December 2023 119,316 6,482 8,327 134,125
As at 31 December 2023, Property and Equipment includes right-of-use assets of €6.6 million (2022: €8.6 million) related to office
premises and motor vehicles (see note 22).
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
107
21. PROPERTY AND EQUIPMENT (continued)
21.1 Reconciliation of carrying amount
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Carrying amount of land and buildings occupied for own use119,292 116,743 119,316 116,771 Future capital expenditure:- contracted but not provided for in the financial statements 2,365 1,492 2,365 1,492 - authorised by the directors but not contracted for15,023 22,746 15,005 22,738
Land and buildings are revalued by professionally qualified architects in accordance with the policy documented in Note 1. The
carrying amounts of land and buildings that would have been included in the financial statements had these assets been carried at
cost less accumulated depreciation are:
2023: Group and Bank €50.3 million (2022: Group and Bank €49.8 million).
Property valuations are mainly valued using the ‘comparative investment approach’ whereby market value is arrived at by capitalising
at an appropriate yield rate, the annual income produced, should the property be leased out to third parties. The income is arrived
at by analysing a number of estate agent listings for comparative properties and determining a mean rental value rate. The valuation
techniques were consistent with those applied for the year ended 31 December 2022. Revaluations are carried out on a regular basis
in accordance with the Group’s accounting policies.
Property fair value measurement is classified as Level 3. Significant unobservable inputs used in the valuation of these properties is the
rental income for office space and the percentage capitalisation rate which indicates the multiplier relationship between Net Rental
Income and Property Value. Further details about these significant inputs are summarised in the table below:
Significant unobservable input Narrative sensitivityBuildings in Commercial Area Price per square metre, The higher the price per square ranging from €55/sqm to €960/sqm metre the higher the fair valueCapitalisation rate, ranging from The higher the capitalisation rate 5.31% to 8.30% the lower the fair valueBuildings in Residential Area Price per square metre, ranging from The higher the price per square metre €120/sqm to €529/sqm the higher the fair valueCapitalisation rate, ranging from The higher the capitalisation rate 5.75% to 8.10% the lower the fair value
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
108
22. LEASES
The Group’s lease arrangements comprise long-term leasehold properties, other immovable property leaseholds, equipment leases
and property space for ATMs. The Group does not recognise low value items (below €5,000) or short-term arrangements of one year
or less.
Information about leases for which the Group is a lessee is presented below.
i. Right-of-use assets
Right-of-use assets relate to office premises and motor vehicles that are presented within property and equipment (see note 21)
The GroupLand and Other TotalBuildings€000 €000 €000Balance at 1 January 2022 7,679 814 8,493 Additions 1,504 332 1,836 Depreciation charge for the year (1,356) (263) (1,619) Disposals - (89) (89)Balance at 31 December 2022 7,827 794 8,621 Balance at 1 January 2023 7,827 794 8,621 Additions 517 50 567 Depreciation charge for the year (1,404) (224) (1,628) Disposals (918) (51) (969)Balance at 31 December 2023 6,022 569 6,591
The BankLand and Other TotalBuildings€000 €000 €000Balance at 1 January 2022 7,679 793 8,472 Additions 1,503 333 1,836 Depreciation charge for the year (1,356) (250) (1,606) Disposals - (89) (89)Balance at 31 December 2022 7,826 787 8,613 Balance at 1 January 2023 7,826 787 8,613 Additions 517 50 567 Depreciation charge for the year (1,404) (219) (1,623) Disposals (918) (51) (969)Balance at 31 December 2023 6,021 567 6,588
See note 28 for maturity analysis of lease liabilities as at 31 December 2023.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
109
22. LEASES (continued)
ii. Amounts recognised in profit or loss
The GroupLand and Other TotalBuildings€000 €000 €000Interest on lease liabilities 2022 194 14 208 Expenses relating to short-term leases 2022 88 - 88 282 14 296 Interest on lease liabilities 2023 190 11 201 Expenses relating to short-term leases 2023 534 13 547 724 24 748
The BankLand and Other TotalBuildings€000 €000 €000Interest on lease liabilities 2022 194 13 207 Expenses relating to short-term leases 2022 88 - 88 282 13 295 Interest on lease liabilities 2023 190 10 200 Expenses relating to short-term leases 2023 534 13 547 724 23 747
iii. Amounts recognised in statement of cash flowsThe GroupLand and Other TotalBuildings€000 €000 €000Total cash outflow for leases 2022 1,460 279 1,739 Total cash outflow for leases 2023 1,525 238 1,763
The BankLand and Other TotalBuildings€000 €000 €000Total cash outflow for leases 2022 1,460 266 1,726 Total cash outflow for leases 2023 1,525 231 1,756
iv. Extension options
Some property leases contain extension options exercisable by the Group and not by the lessors. The Group assesses at lease
commencement date whether it is reasonably certain to exercise the extension options, and if it is reasonably certain to exercise the
extension option, the Group includes this period in the lease term and the potential future lease payments in the lease liability.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
110
23. DEFERRED TAX
The Group’s deferred tax assets and liabilities on the statement of financial position have not been off-set to the extent that there is
no legally enforceable right of set-off with the tax authorities.
The Bank is expected to have sufficient profits in the future to absorb the deferred tax asset recognised.
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Deferred taxation is analysed as follows:Net deferred tax asset arising on: Fair value movement of financial instruments 281 281 281 281 Impairment allowances 42,876 52,250 42,876 52,250 Allowance for employee benefits 3,411 3,548 3,411 3,548 Excess of capital allowances over depreciation (15,870) (16,218) (15,870) (16,218) Defined benefit plans 2,415 2,469 2,415 2,469 Provisions and other temporary differences 912 310 824 284 Unabsorbed tax losses - 25,258 - 25,258 34,025 67,898 33,937 67,872 Deferred tax liability arising on: Property revaluation 7,435 7,054 7,435 7,054
The GroupAt 31 Recognised Recognised Recognised At 31 December in profit or in OCIin other December 2022lossequity2023€000 €000 €000 €000 €000Movement in temporary differences relating to: Fair value movement of financial instruments 281 - - - 281 Impairment allowances 52,250 (9,374) - - 42,876 Allowance for employee benefits 3,548 (137) - - 3,411 Excess of capital allowances over depreciation (16,218) 348 - - (15,870) Defined benefit plans 2,469 - (54) - 2,415 Property revaluation (7,054) 45 (426) - (7,435) Provisions and other temporary differences 310 610 (8) - 912 Unabsorbed tax losses 25,258 (25,258) - - - 60,844 (33,766) (488) - 26,590
The GroupAt 31 Recognised Recognised Recognised At 31 December in profit or in OCIin other December 2021lossequity2022€000 €000 €000 €000 €000Movement in temporary differences relating to: Fair value movement of financial instruments 281 - - - 281 Impairment allowances 65,669 (13,419) - - 52,250 Allowance for employee benefits 2,943 605 - - 3,548 Excess of capital allowances over depreciation (15,669) (549) - - (16,218) Defined benefit plans 3,339 - (870) - 2,469 Property revaluation (6,717) - (337) - (7,054) Provisions and other temporary differences 28,000 (27,690) - - 310 Unabsorbed tax losses - 22,967 2,291 - 25,258 77,846 (18,086) 1,084 - 60,844
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
111
23. DEFERRED TAX (continued)
The BankAt 31 Recognised Recognised Recognised At 31 December in profit or in OCIin other December 2022lossequity2023€000 €000 €000 €000 €000Movement in temporary differences relating to: Fair value movement of financial instruments 281 - - - 281 Impairment allowances 52,250 (9,374) - - 42,876 Allowance for employee benefits 3,548 (137) - - 3,411 Excess of capital allowances over depreciation (16,218) 348 - - (15,870) Defined benefit plans 2,469 - (54) - 2,415 Property revaluation (7,054) 45 (426) - (7,435) Provisions and other temporary differences 284 548 (8) - 824 Unabsorbed tax losses 25,258 (25,258) - - - 60,818 (33,828) (488) - 26,502
The BankAt 31 Recognised Recognised Recognised At 31 December in profit or in OCIin other December 2021lossequity2022€000 €000 €000 €000 €000Movement in temporary differences relating to: Fair value movement of financial instruments 281 - - - 281 Impairment allowances 65,669 (13,419) - - 52,250 Allowance for employee benefits 2,943 605 - - 3,548 Excess of capital allowances over depreciation (15,669) (549) - - (16,218) Defined benefit plans 3,339 - (870) - 2,469 Property revaluation (6,717) - (337) - (7,054) Provisions and other temporary differences 28,000 (27,716) - - 284 Unabsorbed tax losses - 22,967 2,291 - 25,258 77,846 (18,112) 1,084 - 60,818
24. OTHER ASSETS The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Settlement account 7,504 5,963 7,504 5,963 Deferred expenditure 368 281 368 281 Other assets 4,874 983 4,874 983 12,746 7,227 12,746 7,227
The Settlement account consists of card settlements.
25. AMOUNTS OWED TO BANKS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Term deposits 290,603 55,878 290,603 55,878 Repayable on demand 25,048 21,196 25,048 21,196 315,651 77,074 315,651 77,074
Balances with a carrying amount of €10.0 million (2022: €25.7 million) were held as collateral against derivative contracts.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
112
26. AMOUNTS OWED TO CUSTOMERS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Term deposits 177,354 430,195 177,354 430,195 Repayable on demand 11,974,862 12,117,716 11,979,690 12,124,389 12,152,216 12,547,911 12,157,044 12,554,584
27. OTHER LIABILITIES The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Post-employment and termination liabilities (see note 35) 16,741 17,282 16,741 17,282 Cash collateral for commitments 66,095 68,361 66,095 68,361 Deposits from companies in formation 2,589 4,235 2,589 4,235 Bills payable 41,025 40,633 41,025 40,633 Accruals and deferred income 26,345 24,096 26,021 23,875 Payment orders outwards 12,464 4,910 12,464 4,910 Lease liability (see note 28) 6,893 8,918 6,891 8,910 Taxation payable 7,650 4,368 7,650 4,368 Other 18,376 18,749 18,175 18,710 198,178 191,552 197,651 191,284
28. LEASE LIABILITY
At 31 December 2023, the future minimum lease payments under non-cancellable operating leases were payable as follows:
The GroupLand and Other TotalBuildings€000 €000 €000Maturity analysis - Contractual undiscounted cash flowsLess than one year 1,160 202 1,362 Between one and five years 3,093 374 3,467 More than five years3,722 18 3,740 Total undiscounted lease liabilities at 31 December 2023 7,975 594 8,569 Lease liabilities included in statement of financial position at 31 December 2023:Current 1,007 197 1,204 Non-current5,307 382 5,689 6,314 579 6,893
The BankLand and Other TotalBuildings€000 €000 €000Maturity analysis - Contractual undiscounted cash flowsLess than one year 1,160 202 1,362 Between one and five years 3,093 373 3,466 More than five years3,722 18 3,740 Total undiscounted lease liabilities at 31 December 2023 7,975 593 8,568 Lease liabilities included in statement of financial position at 31 December 2023:Current 1,007 195 1,202 Non-current5,307 382 5,689 6,314 577 6,891
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
113
At 31 December 2022, the future minimum lease payments under non-cancellable operating leases were payable as follows:
The GroupLand and Other TotalBuildings€000 €000 €000Maturity analysis - Contractual undiscounted cash flowsLess than one year 1,416 244 1,660 Between one and five years 4,261 524 4,785 More than five years 4,246 68 4,314 Total undiscounted lease liabilities at 31 December 2022 9,923 836 10,759 Lease liabilities included in statement of financial position at 31 December 2022:Current 1,239 234 1,473 Non-current 6,870 575 7,445 8,109 809 8,918
The BankLand and Other TotalBuildings€000 €000 €000Maturity analysis - Contractual undiscounted cash flowsLess than one year 1,416 244 1,660 Between one and five years 4,261 515 4,776 More than five years 4,246 68 4,314 Total undiscounted lease liabilities at 31 December 2022 9,923 827 10,750 Lease liabilities included in statement of financial position at 31 December 2022: Current 1,239 233 1,472 Non-current 6,870 568 7,438 8,109 801 8,910
29. DERIVATIVES DESIGNATED FOR HEDGE ACCOUNTING The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Derivative financial instruments designated as fairvalue hedges-Gross amounts of financial instruments 1,727 2,167 1,727 2,167 -Related financial instruments that are offset (1,727) - (1,727) - Net amount - 2,167 - 2,167
Refer to note 6: Net gain on Investments and hedging instruments for the net gain/loss on the bond and hedging instrument.
The above comprise over-the-counter interest rate swaps, stated at fair value with notional amounts analysed by the remaining life
as follows:
-more than 1 year 58,680 60,879 58,680 60,879 58,680 60,879 58,680 60,879
28. LEASE LIABILITY (continued)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
114
30. DEBT SECURITIES IN ISSUE AND SUBORDINATED LIABILITIES
The Group The BankNote 2023 2022 2023 2022€000 €000 €000 €000Debt securities in issueSenior non-preferred notes 30.1 350,099 350,260 350,099 350,260 350,099 350,260 350,099 350,260 Subordinates liabilities3.50% Euro subordinated unsecured bonds 30.2 113,130 113,130 113,130 113,130 3.75% Euro subordinated unsecured bonds 30.2 50,107 50,107 50,107 50,107 163,237 163,237 163,237 163,237
30.1 Senior non-preferred notes
On 6 December 2022, the Bank has issued €350 million Callable Senior Non-Preferred Notes (traded on the Irish Stock Exchange) with
a final maturity date of 6 December 2027 and a fixed coupon of 10% per annum. The fair value as of 31 December 2023 is €379.8
million (2022: €358.1 million). The Senior Non-Preferred Notes constitute direct, unconditional, unsecured, and unsubordinated
obligations of the Bank and rank in priority to all subordinated claims but are junior in right of payment to all preferred claims and all
ordinary unsecured claims. The Notes were rated by Fitch as BBB-.
30.2 Subordinated liabilities
The 3.5% Euro subordinated bonds are redeemable at par on 8 August 2030 and are listed on the Malta Stock Exchange. The fair
value of these unsecured bonds as of 31 December 2023 is €100.7 million (2022: €94.2 million).
The 3.75% Euro subordinated bonds are redeemable at par on 15 June 2031 and are listed on the Malta Stock Exchange. The fair
value of these unsecured bonds as of 31 December 2023 is €46.0 million (2022: €45.0 million).
The bonds are unsecured and subordinated to the claims of all holders of senior indebtedness.
31. SHARE CAPITAL AND SHARE PREMIUM
The Bank2023 2022€000 €000Share CapitalAuthorised:1,000,000,000 Ordinary shares of €1.00 each 1,000,000 1,000,000 (2022: 1,000,000,000 Ordinary shares of €1.00 each)Issued and paid up:583,849,000 Ordinary shares of €1.00 each fully paid 583,849 583,849 (2022: 583,849,000 Ordinary shares of €1.00 each)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
115
32. OTHER RESERVES
Retained Earnings
Retained earnings represent the profits retained over the years and primarily comprise the profit attributable to equity holders and
transfers to share capital in respect of the bonus issue. This reserve includes the amount held in respect of General Banking Reserves.
General Banking Reserves
The revised Banking Rule 09 requires banks in Malta to hold additional reserves for general banking risks against non-performing
loans. This reserve is deductible from distributable funds. As at the reporting date this reserve amounts to €3.4 million (2022: €3.6
million).
Revaluation Reserves
Revaluation reserves represent fair value movements on land and buildings and financial assets at FVOCI net of tax, which are
recognised in Other Comprehensive Income.
The Group The Bank€000 €000On land and buildings:Balance at 31 December 2021 49,022 49,022 Property revaluation 3,366 3,366 Deferred tax and effect of changes in property tax rates (337) (337)Balance at 31 December 2022 52,051 52,051 Property revaluation 4,255 4,255 Deferred tax and effect of changes in property tax rates (426) (426) Release on sale of property (356) (356) tax thereon 36 36 Balance at 31 December 2023 55,560 55,560 On fair-value-through-other comprehensive income:Balance at 31 December 2021 9,416 9,304 Fair value adjustments (6,546) (6,546) tax thereon 2,291 2,291 Balance at 31 December 2022 5,161 5,049 Fair value adjustments 1,368 1,368 tax thereon (479) (479) Gain on sale (3,049) (3,049) tax thereon 1,067 1,067 Balance at 31 December 2023 4,068 3,956 Total 59,628 59,516
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
116
33. PROVISIONS AND CONTINGENCIES
33.1 Provisions
The Bank considers the provisions recognised to be the best estimate of the amounts likely required to settle its claims and are
presented as follows:
The GroupFinancial guarantees Custody and Other and loan trust litigation litigation Totalcommitments provisionprovisionprovisionsProvisions €000 €000 €000 €000Carrying amount at 1 January 2023 15,556 - 962 16,518 Movement 2,257 - 1,391 3,648 Carrying amount at 31 December 2023 17,813 - 2,353 20,166
The BankFinancial guarantees Custody and Other and loan trust litigation litigation Totalcommitments provisionprovisionprovisionsProvisions €000 €000 €000 €000Carrying amount at 1 January 2023 15,556 - 812 16,368 Movement 2,257 - 1,391 3,648 Carrying amount at 31 December 2023 17,813 - 2,203 20,016
The GroupFinancial guarantees Custody and Other and loan trust litigation litigation Totalcommitments provisionprovisionprovisionsProvisions €000 €000 €000 €000Carrying amount at 1 January 2022 22,949 80,945 555 104,449 Movement (7,393) (80,945) 407 (87,931)Carrying amount at 31 December 2022 15,556 - 962 16,518
The BankFinancial guarantees Custody and Other and loan trust litigation litigation Totalcommitments provisionprovisionprovisionsProvisions €000 €000 €000 €000Carrying amount at 1 January 2022 22,949 80,945 555 104,449 Movement (7,393) (80,945) 257 (88,081)Carrying amount at 31 December 2022 15,556 - 812 16,368
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
117
33. PROVISIONS AND CONTINGENCIES (continued)
33.1 Provisions (continued)
The amount in respect of financial guarantee contracts and loan commitments issued represent the expected credit loss as of 31
December 2023. The custody and trust litigation provision in the comparative year consists of movement relating to the Deiulemar
case whilst other litigation provision movement represents the increase/(decrease) in liabilities or the release of liability following
settlement of other litigation claims.
There have been significant developments in the comparative year in relation to the principal legal case of the Group and Bank, that
relating to custody and trusts. In November 2014, court action was instituted against the Bank by the curators of Deiulemar group
which was declared insolvent when the shares in the ultimate holding company were held in trust by the Bank with a claim of €363
million. In February 2022, the first court in Torre Annunziata decided against the Bank and in favour of the Deiulemar bankruptcy
and ordered the Bank to pay a sum equivalent to around €370 million. The Bank proceeded to immediately appeal this judgement on
the strong merits of its legal case. However, subsequently in May 2022, the Bank reached an out-of-court settlement agreement of
€182.5 million, without any admission of fault, bringing all legal claims surrounding the issue to an end. The Bank shall not have any
further ongoing contingent or actual liability relating to this claim. This resulted in the reversal of €80.9 million provision as disclosed
in Note 33 and a resultant impact of €103.0 million including legal fees in 2022 statement of profit or loss. A total of €363 million
in securities previously held with an Italian bank following a garnishee order were released in the comparative year and are now free
from any encumbrance.
33.2 Contingent liabilities
In its ordinary course of business, the Group and the Bank is subject to complaints or legal proceedings by third parties, as well as
legal and regulatory reviews, enquiries and examinations concerning legal, operational and compliance risks in relation to but not
limited to compliance with legislation and regulations. Such legal and regulatory matters are reassessed on an ongoing basis whilst
the Group and the Bank collaborates continuously with the relevant authorities as appropriate. The assistance of external professional
consultants is obtained where appropriate, to determine the likelihood of the Group and the Bank incurring a liability.
Contingent liabilities are backed by corresponding obligations from third parties. Except as disclosed hereunder, it is not practicable to
provide an aggregate estimate of other potential liability for the Group’s and the Bank’s legal proceedings, legal and regulatory reviews
as a class of contingent liabilities.
Contingencies
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Acceptances and endorsements 60 19 60 19 Guarantees 375,277 354,907 375,277 354,907 Other contingent liabilities 19,077 19,183 19,077 19,183 394,414 374,109 394,414 374,109
34. COMMITMENTS
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000Documentary credits 41,500 28,849 41,500 28,849 Undrawn formal standby facilities, credit facilities and other 2,271,758 1,887,449 2,271,758 1,887,449 commitments to lendCapital expenditure contracted but not provided for in the 2,704 1,821 2,686 1,821 financial statements2,315,962 1,918,119 2,315,944 1,918,119
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
118
35. EMPLOYEE BENEFITS
35.1 Post-employment benefits
35.1.1 Defined benefit plan – Pension Top-up
The Group and the Bank contributes to a post-employment benefit plan (“the plan”) which is applicable to eligible individuals. The
benefits provided to the individuals in terms of the plan are computed on a specified formula which takes into consideration, amongst
other things, the employees’ salary on retirement and the pension entitlement in terms of Maltese law.
The provision is computed in accordance with the accounting policy for post-employment benefit plans and represents the Group’s
and the Bank’s obligation:
(i) discounted to the net present value at the rate which has been determined by reference to market yields at the end of the
reporting period on high-quality corporate bonds;
(ii) after considering the life expectancy of such employees based on the latest publicly available mortality tables;
(iii) the expected terminal salaries; and
(iv) the Bank’s expectations of the employees’ retirement date.
The year-end obligation in relation to the plan is mainly in relation to retired employees.
The plan exposes the Group and the Bank to the following main risks:
(i) interest risk, since a decrease in market yields will increase the plan liability; and
(ii) longevity risk, since an increase in the life expectancy of the plan participants will increase the plan liability.
The significant actuarial assumptions applied by the Group and the Bank in respect of the plan are as follows:
The Group and the Bank2023 2022Weighted discount rates - Euro corporate yield per Bloomberg 3.13% 3.55%Life expectancy (years):Males 81 81 Females 86 85
The Group and the Bank are providing sensitivity analysis in connection with each significant actuarial assumption applied in respect
of the plan. These analyses are prepared as of the end of the reporting period, showing how the liability would have been affected
by hypothetical changes in the relevant actuarial assumptions that were reasonably possible at that date, while holding all other
assumptions constant. The analysis presented below are for illustrative purposes only and may not be representative of the actual
change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another. In
presenting the sensitivity analysis, the present value of the obligation has been calculated using the projected unit credit method at
the end of the reporting period. The amounts generated from the analysis represent forward-looking estimates and hence, actual
results in the future may differ materially from those projected results. In accordance with the transitional provisions in the revised IAS
19, the Group and the Bank have not disclosed comparative information in this respect.
• If the discount rate is 100 basis points higher (lower) with all other assumptions held constant, the defined benefit obligation
decreases by €0.5 million (decreases by €0.6 million).
• If the life expectancy increases (decreases) by two years for both men and women with all other assumptions held constant, the
defined benefit obligation increases by €2.3 million (increases by €2.2 million).
The weighted average duration of the liability in respect of the plan at 31 December 2023 is 6 years (2022: 7 years).
The Bank does not fund these pensions by assigning specific assets as there is sufficient liquidity to meet the required payments
as these arise. In view of the non-complexity of the inputs involved, no actuary was deemed necessary in estimating this obligation.
Furthermore, the Group and the Bank make payments to certain eligible employees in consideration of the liquidation of a defunct
pension scheme.
35.1.2 Defined contribution plan – Voluntary Occupational Pensions Scheme
The Voluntary Occupational Pension Scheme was introduced in 2022 in which the Group and the Bank assists eligible employees that
opt for the scheme in saving for their retirement (Note 7).
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
119
35. EMPLOYEE BENEFITS (continued)
35.2 Termination benefits
The Bank has retained the Gradual Retirement and Retirement Gratuity Schemes similar to prior years. The Gradual retirement
consists of reduced number of hours worked whilst applicants eligible for the Retirement Gratuity Scheme shall be given a lump sum
payment of one time their terminal salary and a proportion of the terminal annual salary depending on the aggregate years of service.
Furthermore, the Group and Bank have introduced a new Voluntary Retirement Scheme for eligible employees as of 1 April 2022 in
which formal notice is required within a stipulated period. The scheme shall remain open indefinitely whilst remaining at the Group
and Bank’s discretion. Accepted applicants under the respective scheme shall be given a lump sum payment of three times their
terminal salary reduced pro-rata up to the age of 61.
35.3 Summary of movements in post-employment and termination benefits
The Group and the Bank2023 2022€000 €000 Present value at 1 January 17,282 18,042 Payments effected (6,337) (5,650) Recognised in profit or loss: - Interest expense 129 (67) - Terminal benefits 5,816 7,447 Remeasurement of actuarial (losses)/gains recognised in other comprehensive income resulting from: - Experience adjustments (384) (229) - Changes in financial assumptions 226 (2,574) - Changes in demographic assumptions 9 313 Present value at 31 December 16,741 17,282
36. NOTES TO THE STATEMENTS OF CASH FLOWS The Group The BankNote 2023 2022 2023 2022€000 €000 €000 €000Cash 13 75,647 85,760 75,647 85,760 Balances with Central Bank of Malta 2,158,243 2,940,953 2,158,243 2,940,953 (excluding Reserve Deposit)Treasury bills (with original maturity of less than 3 months) - 235,064 - 235,064 Money at call and short notice 196,767 392,596 196,767 392,596 Amounts owed to banks (211,923) (75,071) (211,923) (75,071)Cash and cash equivalents included in the statements of cash flows 2,218,734 3,579,302 2,218,734 3,579,302 Balances with contractual maturity of more than 3 months (104,188) 2,911 (104,188) 2,911 2,114,546 3,582,213 2,114,546 3,582,213 Equivalent items reported in the statements of financial position:Balances with Central Bank of Malta, Treasury bills and cash 2,233,890 3,264,741 2,233,890 3,264,741 (excluding Reserve Deposit)Loans and advances to banks 196,307 394,546 196,307 394,546 Amounts owed to banks (315,651) (77,074) (315,651) (77,074)2,114,546 3,582,213 2,114,546 3,582,213
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
120
37. RELATED PARTY TRANSACTIONS
During the current and prior year, the Group and the Bank entered into transactions during the course of their normal business,
with equity-accounted investees, subsidiaries, the Government of Malta (“The Government”) (which has a 25% holding in the Bank),
Government related entities, key management personnel, and other related parties. Government related entities are those where, in
the opinion of the Bank, the Government is either deemed to exercise control, that is, it has the power to govern the financial and
operating policies of the entity or linked to the Government but not controlled by the Government.
Key management personnel includes the Chairman, Directors, the members of the Management Board and their respective spouses,
spousal equivalent and dependants. Other related parties are those companies over which the key management personnel hold
control or significant influence (directorship).
Transactions with related parties are made on an arm’s length basis.
The Bank also entered into related party transactions on an arm’s length basis with its subsidiaries and equity-accounted investees.
Transactions between the Bank and its subsidiaries have been eliminated on consolidation.
The amounts due to or from related parties are settled in cash and the amount of related party transactions and outstanding balances
at the reporting date are disclosed below:
The Group 2023 2022Related party Total activity/ % of Related party Total activity/ % of balancesbalancetotalbalancesbalancetotal€000 €000 €000 €000Interest and similar income:- on loans and advancesThe Government 89,048 4,609 Government related entities 19,297 13,905 Key management personnel 29 29 Other related parties 310 335 108,684 323,404 34% 18,878 196,277 10%Interest and similar income: - on debt and other fixed income instrumentsThe Government 16,690 77,998 21% 9,184 23,933 38%Interest expenseEquity-accounted investees 179 958 The Government 11 105 Government related entities 336 42 Key management personnel 1 2 527 49,403 1% 1,107 18,311 6%Fee and commission incomeEquity-accounted investees 2,947 4,877 The Government 2,547 3,654 Government related entities 1,482 1,957 Key management personnel 4 2 Other related parties 16 25 6,996 91,988 8% 10,515 89,114 12%
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
121
37. RELATED PARTY TRANSACTIONS (continued)
The Group 20232022Related party Total activity/ Related party Total activity/ balancesbalance % ofbalancesbalance % of€000 €000 total €000 €000 totalShort term employee compensation and benefits including post-employment benefitsKey management personnel 3,408 111,061 3% 3,119 100,033 3%General administrative expensesEquity-accounted investees 376 311 Key management personnel 77 51 Other related parties 47 62 500 78,659 1% 424 72,945 1%Movement in impairment allowancesThe Government 41 (59)Government related entities (240) 3,082 Key management personnel 16 (15)Other related parties (2) (23)(185) 10,481 -2% 2,985 49,075 6%Balances with Central Bank of Maltatreasury bills and cashThe Government 2,277,670 2,353,317 97% 3,303,501 3,389,261 97%Financial assets at fair value through profit or loss The Government - 113,853 0% 1,040 146,363 1%InvestmentsThe Government 1,653,448 5,353,462 31% 1,191,064 4,567,064 26%Loans and advances to customers (net)The Government 71,528 35,954 Government related entities 419,507 381,306 Key management personnel 3,541 3,967 Other related parties 2,389 10,094 496,965 6,114,589 8% 431,321 5,560,076 8%Impairment allowancesThe Government (68) (109)Government related entities (378) (138)Key management personnel (7) (23)Other related parties (26) (24)(479) (103,546) 0% (294) (132,917) 0%Amounts owed to customersEquity-accounted investees 33,615 164,344 The Government 565,550 441,086 Government related entities 254,546 236,340 Key management personnel 8,532 6,876 Other related parties 3,417 3,224 865,660 12,152,216 7% 851,870 12,547,911 7%
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
122
37. RELATED PARTY TRANSACTIONS (continued)
The Group 2023 2022 Related party Total activity/ Related party Total activity/ balancesbalance % ofbalancesbalance % of€000 €000 total €000 €000 totalTotal Assets less LiabilitiesEquity-accounted investees (33,615) (164,344)The Government 3,437,028 4,090,364 Government related entities 164,583 144,828 Key management personnel (4,998) (2,932)Other related parties (1,054) 6,846 3,561,944 4,074,762 CommitmentsEquity-accounted investees 317 317 The Government 72,009 72,958 Government related entities 91,976 105,909 Key management personnel 884 181 Other related parties 142 1,086 165,328 2,315,962 7% 180,451 1,918,119 9%
The Bank 2023 2022 Related party Total activity/ Related party Total activity/ balancesbalance % ofbalancesbalance % of€000 €000 total €000 €000 totalInterest and similar income:- on loans and advancesThe Government 89,048 4,609 Government related entities 19,297 13,905 Key management personnel 11 14 Other related parties 282 335 108,638 323,404 34% 18,863 196,277 10%Interest and similar income: - on debt and other fixed income instrumentsThe Government 16,690 77,998 21% 9,184 23,933 38%Interest expenseEquity-accounted investees 179 958 The Government 11 105 Government related entities 336 42 Key management personnel - 1 526 49,403 1% 1,106 18,311 6%Fee and commission incomeEquity-accounted investees 2,947 4,877 Subsidiaries 2,270 1,682 The Government 2,547 3,654 Government related entities 1,482 1,957 Key management personnel 3 2 Other related parties 13 25 9,262 83,796 11% 12,197 79,995 15%Dividend incomeEquity-accounted investees 1,562 2,046 Subsidiaries 5,500 6,700 7,062 9,802 72% 8,746 9,386 93%
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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123
37. RELATED PARTY TRANSACTIONS (continued)
The Bank 2023 2022 Related party Total activity/ Related party Total activity/ balancesbalance % ofbalancesbalance % of€000 €000 total €000 €000 totalShort term employee compensation and benefits including post-employment benefitsKey management personnel 3,257 108,394 3% 2,954 97,659 3%General administrative expensesEquity-accounted investees 376 311 Key management personnel 77 26 Other related parties 47 21 500 76,815 1% 358 71,075 1%Movement in impairment allowancesThe Government 41 (59)Government related entities (240) 3,082 Key management personnel (2) - Other related parties 2 (25)(199) 10,481 -2% 2,998 49,075 6%Balances with Central Bank of Malta treasury bills and cashThe Government 2,277,670 2,353,317 97% 3,303,501 3,389,261 97%Financial assets at fair value through profit or loss The Government - 113,562 0% 1,040 146,211 1%InvestmentsThe Government 1,653,448 5,353,462 31% 1,191,064 4,567,064 26%Loans and advances to customers (net)The Government 71,528 35,954 Government related entities 419,507 381,306 Key management personnel 2,132 2,733 Other related parties 1,847 10,094 495,014 6,114,589 8% 430,087 5,560,076 8%Impairment allowancesThe Government (68) (109)Government related entities (378) (138)Key management personnel (6) (4)Other related parties (22) (24)(474) (103,546) 0% (275) (132,917) 0%Other assetsSubsidiaries 151 74,344 0% 78 124,366 0%Amounts owed to customersEquity-accounted investees 33,615 164,344 Subsidiaries 4,828 6,673 The Government 565,550 441,086 Government related entities 254,546 236,340 Key management personnel 7,908 6,143 Other related parties 1,521 3,224 867,968 12,157,044 7% 857,810 12,554,584 7%
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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124
37. RELATED PARTY TRANSACTIONS (continued)
The Bank 2023 2022 Related party Total activity/ Related party Total activity/ balancesbalance % ofbalancesbalance % of€000 €000 total €000 €000 totalTotal Assets less LiabilitiesEquity-accounted investees (33,615) (164,344)Subsidiaries (4,677) (6,595)The Government 3,437,028 4,090,364 Government related entities 164,583 144,828 Key management personnel (5,782) (3,414)Other related parties 304 6,846 3,557,841 4,067,685 CommitmentsEquity-accounted investees 317 317 The Government 72,009 72,958 Government related entities 91,976 105,909 Key management personnel 281 160 Other related parties 142 1,086 164,725 2,315,944 7% 180,430 1,918,119 9%
The Group The Bank2023 2022 2023 2022€000 €000 €000 €000All outstanding balances are secured except for the following:Loans and advances to customers:- Key management personnel 52 66 46 60 52 66 46 60 Details of guarantees received are disclosed below:Loans and advances to customers:- Amounts guaranteed by The Government 371,383 323,246 371,383 323,246
The above facilities do not involve more than the normal risk of repayment or present other unfavourable features and were made
in the ordinary course of business on substantially the same terms as for comparable transactions with persons of a similar standing,
or where applicable, other employees.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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125
37. RELATED PARTY TRANSACTIONS (continued)
Loans to and commitments on behalf of directors and other key management personnel (including connected persons):
The Group The BankLoans and Loans andadvances Commitments advances Commitments€000 €000 €000 €000DirectorsAt 31 December 2021 1,969 114 915 85 Additions 282 32 39 24 2,251 146 954 109 Less reductions/repayments (99) (18) (36) (10)At 31 December 2022 2,152 128 918 99 Additions 92 576 55 5 2,244 704 973 104 Less reductions/repayments (789) (46) (540) (48)At 31 December 2023 1,455 658 433 56 Other key management personnelAt 31 December 2021 2,000 216 2,000 216 Additions 163 7 163 7 2,163 223 2,163 223 Less reductions/repayments (349) (169) (349) (169)At 31 December 2022 1,814 54 1,814 54 Additions 671 180 671 180 2,485 234 2,485 234 Less reductions/repayments (788) (11) (788) (11)At 31 December 2023 1,697 223 1,697 223
38. SEGMENTAL INFORMATION BY CLASSES OF BUSINESS
The Group’s reportable segments as at 31 December 2023 and 31 December 2022 are as follows:
Reportable segments Operations
Retail Banking Loan products, cards, payment and other transactions for all client segments of the Bank. It
also includes all deposit products for non-corporate and non-institutional client segments,
internet/mobile banking activities, ATM activities and all Bank retail branches operations.
Wealth Management Discretionary advisory and wealth management services, insurance and stock broking
services, asset and fund management, prestige and private banking.
Business Banking Financing and business deposit products for all business client segments including business
and corporate centers.
Treasury Proprietary investments, derivatives, and other investment related revenues. It also includes
custody services and investment operations.
Associates and Others Share of profits from associates, custody services, and other non-client specific investments.
This includes the management of the Bank's property, plant and equipment, investments,
other assets, long-term liabilities and other liabilities.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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126
38. SEGMENTAL INFORMATION BY CLASSES OF BUSINESS (continued)
38.1 Information by segment
Interest income is the main revenue generating activity for all segments. The customer-oriented segments also have income derived
from fees and commissions and earnings arising on foreign exchange transactions.
Associates, Total Reportable Retail Banking Wealth Management Business Banking TreasuryInvestments & OthersSegments2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 restatedrestated€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000Interest income147,194 95,976 - - 171,273 99,262 82,935 24,972 - - 401,402 220,210Interest expense(16,060) (4,625) (420) - (16,266) (2,277) (10,766) (3,094) (5,891) (8,315) (49,403) (18,311)Fee and commission 44,273 43,222 19,158 21,651 24,812 21,799 913 447 2,832 1,995 91,988 89,114incomeFee and commission (12,981) (10,530) (1) (23) - (161) (35) (1,140) (924) (692) (13,941) (12,546)expenseTrading profits/(losses)3,326 - 130 (40) 1,072 - 417 8,670 - - 4,945 8,630Gains/(losses) from - - 5 (1,157) - - 625 3,377 2,641 3,399 3,271 5,619financial assetsDividend income- - - - - - 1,178 641 1,562 - 2,740 641Depreciation/(12,588) (12,239) (3,125) (2,476) (4,243) (3,736) (721) (630) (503) (557) (21,180) (19,638)amortisationOther costs(108,032) (95,504) (25,435) (24,497) (42,736) (40,309) (5,945) (6,155) (7,572) (6,513) (189,720) (172,978)Impairment reversal/3,229 1,288 - - 11,315 47,708 (4,063) 79 - - 10,481 49,075(charge)Operating profit/(loss) before litigation 48,361 17,588 (9,688) (6,542) 145,227 122,286 64,538 27,167 (7,855) (10,683) 240,583 149,816settlementNet litigation settlement - - - - - - - - - (102,958) - (102,958)chargeOperating profit/(loss) before share of results 48,361 17,588 (9,688) (6,542) 145,227 122,286 64,538 27,167 (7,855) (113,641) 240,583 46,858of equity-accounted investeesGroup share results after tax of equity-accounted - - - - - - - - 11,030 2,217 11,030 2,217investeesGroup profit before 251,613 49,075taxation for the year
Associates, Total Reportable Retail Banking Wealth Management Business Banking TreasuryInvestments & OthersSegments2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 restatedrestated€000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 €000ASSETS3,274,385 2,963,486 3,147 1,316 2,957,522 2,697,029 7,944,226 8,409,882 28,756 112,087 14,208,036 14,183,800Property and equipment 184 236 139 289 13,233 13,337 - - 155,432 156,471 168,988 170,333and intangible assetsAdditions to propertyand equipment and22 26 16 8 1,551 1,443 - - 18,237 16,928 19,826 18,405intangible assetsCarrying value of equity-- - - - - - - - 110,098 100,206 110,098 100,206accounted investeesTotal Assets3,274,591 2,963,748 3,302 1,613 2,972,306 2,711,809 7,944,226 8,409,882 312,523 385,692 14,506,948 14,472,744LIABILITIESTotal Liabilities8,300,788 8,405,729 5,688 1,719 4,030,245 4,289,969 484,753 250,321 417,741 412,570 13,239,215 13,360,308
The revenue which is reported above represents revenue generated from external customers. There was no inter-segment revenue
during the year and comparative year.
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1. Segment’s
operating profit represents the profit earned by each segment.
There are no material activities which are carried out outside Malta.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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127
39. FINANCIAL RISK MANAGEMENT
39.1 Use of financial instruments
By their nature, the Group’s activities are principally related to the use of financial instruments including derivatives. The Group
accepts deposits from customers at both fixed and floating rates and for various periods and seeks to earn interest margins by
investing these funds in high-quality assets. The Group seeks to increase these margins by consolidating short-term funds and lending
for longer periods at higher rates, while maintaining sufficient liquidity to meet all claims that might fall due.
The Group also seeks to increase its interest margins through lending to commercial and retail borrowers with a range of credit
standings. Such exposures involve both on-balance sheet loans and advances, as well as guarantees and other commitments such as
performance and other bonds and letters of credit.
The Board places trading limits on the level of exposure that can be taken in relation to both overnight and intra-day market positions.
Foreign exchange and interest rate exposures are normally offset by entering into counterbalancing positions, thereby controlling the
variability in the net cash amounts required to liquidate market positions.
Given that the difference between the Group and the Bank balances in respect of financial instruments, and the corresponding effect
on the statement of profit or loss and other comprehensive income and reserves in respect thereof, are not material, references in this
note to the Group are to be construed as references to the Bank, unless otherwise stated.
The principal areas of financial risk are detailed below:
39.2 Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an
obligation.
Financial assets which could potentially expose the Group to credit risk, mainly include balances with Central Bank of Malta, treasury
bills and cash, derivative financial assets, debt and other fixed income instruments, and loans and advances to banks and customers.
39.2.1 Credit risk management and exposure
(i) Loans and advances
The purpose of credit risk management is to keep credit risk exposure to a permissible level relative to capital, to maintain the
soundness of assets, and to ensure returns commensurate with risk. This leads to a loan portfolio that achieves high returns on capital
and assets.
Credit risk is managed and controlled throughout the Bank on the basis of established credit processes, and within a framework of
credit policy and delegated authorities based on responsibility, skill and experience.
Credit grading and monitoring systems are in place to accommodate the early identification and management of deterioration in loan
quality. In addition, the credit management process is underpinned by an independent system of credit review.
Credit risk analysis is carried out on two levels: the single name; and the Bank’s lending portfolio review. The Bank uses a number of
tools to limit its exposure to undue credit risk. These include the application of:
• High-level credit policies designed to ensure a balanced and managed approach to the identification and mitigation of credit risk;
• Lending guidelines defining the responsibilities of lending officers that seek to provide a disciplined and focused benchmark for
credit decisions;
• Independent reviews of credit exposures;
• Sector caps, encompassing both industry and specific product types, to communicate the Board’s risk appetite for specific types
of business;
• Establishment and maintenance of large exposures and provisioning policies in accordance with regulatory reporting requirements;
and
• Communication and provision of general guidance on all credit-related risk issues, including regulatory changes to promote
consistent and best practice throughout the Bank.
Where possible the Bank aims to reduce and control risk concentrations. Broadly stated, concentration results when the Bank has
a high level of exposure to a single or related group of borrowers, credit exposures secured by a single security, or credit exposures
with common characteristics within an industry, such that adverse developments in this exposure would be damaging to the Bank.
Given the size and nature of the domestic financial sector and the local economy, the Bank is exposed to concentration risk in its credit
business. The Bank has systems in place to identify material concentrations in the loan portfolio, and to ensure adherence to prudential
limits set by the Board of Directors and/or the regulator to single borrowers or groups of related borrowers and other significant risk
concentrations. The CEO and the Board of Directors are regularly informed on the concentration of the Bank’s portfolio.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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128
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
The Group2023 2022€000 €000Households and Individuals 3,230,103 2,964,559 Accommodation and food service activities 459,794 376,063 Wholesale and retail trade 451,710 354,506 Real estate activities 415,164 438,467 Financial and insurance activities 397,378 225,030 Transportation and storage 314,169 413,326 Construction 226,014 285,021 Electricity, Gas, Steam and Air Conditioning Supply 160,610 127,360 Human health and Social work activities 143,880 46,134 Manufacturing 118,642 53,401 Arts, Entertainment and Recreation 72,761 141,000 Information and communication 68,600 139,371 Agriculture, Forestry and Fishing 57,331 76,238 Professional, Scientific and Technical activities 54,132 27,631 Administrative and Support service activities 42,654 39,135 Education 27,028 35,134 Water supply, Sewerage waste management and remediation activities 14,166 9,837 Other services activities 13,215 13,528 Public administration and Defence, Compulsory social security 9,801 1,884 Mining and quarrying 6,288 4,093 Loans and advances to customers 6,283,440 5,771,718 Loans and advances to banks 196,307 394,546 6,479,747 6,166,264
Loans and advances to customers comprises gross loans and advances at amortised cost and loans and advances designated at fair
value through profit and loss as per note 17.
(ii) Other financial assets
The credit risk in respect of other financial assets is mitigated through limits set in the Treasury Management Policy. The Bank assigns
limits on the level of credit risk undertaken in relation to any single counterparty or sovereign exposure in accordance with external
ratings based on Fitch’s ratings or on those of other major rating agencies.
Changes in credit ratings are monitored on a daily basis and are subject to frequent review, when considered necessary. The limits
on the level of credit risk are reviewed consistently and approved by the Board of Directors at regular intervals. Actual exposures are
monitored against limits on an on-going basis. The Bank enters into security transactions only with such authorised counterparties and
it invests only in securities or paper with credit quality within specific parameters stated in the Treasury Management Policy.
The level of concentration in respect of other significant financial assets is disclosed in the remaining notes to the financial statements.
Collateral and other credit enhancements
Credit risk mitigation is one of the key elements of the Group’s credit policy. This includes the requirement to obtain collateral,
depending on the nature of the proposal, as set out in the Bank’s policies and procedures. The nature and level of collateral required
depends on a number of factors, including, but not limited to the amount of the exposure, the type of facility provided, the term of
the facility, the amount of the counterparty’s contribution and an evaluation of the level of the credit risk or probability of default
involved (see note 39.2.1.5).
Settlement Risk
The Group’s activity may give rise to risk at the time of settlement of transactions and trades. Settlement risk is the risk of loss due
to failure of a company to honour its obligations to deliver cash, securities or other assets as contractually agreed. Settlement risk in
respect of security transactions is mitigated through settlement limits assigned to counterparties based on external credit ratings or
by effecting payment on a delivery versus payment (DVP) basis.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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129
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
Sovereign Debt
Sovereign risk refers to the risk that a government may default on its obligations and includes refinancing risk related to the inability
to raise capital to repay maturing bonds. The Group monitors sovereign risks through sovereign credit ratings issued by credit rating
agencies which include Fitch, Moody’s, and Standard & Poor’s. The Treasury Management Policy seeks to mitigate sovereign risk,
whether directly or indirectly through exposures to corporate and financial institutions domiciled therein, through investment limits
assigned on the basis of the long-term credit rating of such sovereigns. This is further supplemented by in depth economic reviews
undertaken periodically and assessments of the fiscal, economic and socio-political aspects upon which such limits are accordingly
aligned.
39.2.1.1 Credit Quality
Financial Assets by external rating agency designation
Balances with CBM Debt Securities Loans and Derivatives Totaland Treasury Bills Advances to BanksThe Group €000 €000 €000 €000 €000As at 31 December 2023AAA 2,277,670 987,475 497 61 3,265,703 AA- to AA+ - 1,033,068 30,774 - 1,063,842 A- to A+ - 2,782,942 109,620 5,995 2,898,557 BBB- to BBB+ - 533,937 45,655 290 579,882 Lower than BBB- - 5,521 9,520 - 15,041 Unrated - 8 241 1,576 1,8252,277,670 5,342,951 196,307 7,922 7,824,850 As at 31 December 2022AAA 3,065,473 1,221,231 3,943 4,062 4,294,709 AA- to AA+ - 820,064 46,845 - 866,909 A- to A+ 238,028 2,104,631 184,882 19,000 2,546,541 BBB- to BBB+ - 383,553 68,682 5,363 457,598 Lower than BBB- - 21,228 9,435 - 30,663 Unrated - 8 80,759 441 81,208 3,303,501 4,550,715 394,546 28,866 8,277,628
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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130
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.1 Credit Quality (continued)
The tables below analyse debt securities by sector, classification and residency.
SectorThe GroupAmortised cost FVOCI FVTPL2023 €000 €000 €000Banks 1,207,968 - 27 Government 3,952,325 13,418 15 Public - 62,533 - Others 106,665 - - 5,266,958 75,951 42
The GroupAmortised cost FVOCI FVTPL2022 €000 €000 €000Banks 743,253 - 22 Government 3,594,113 15,926 1,050 Public - 66,284 - Others 130,067 - - 4,467,433 82,210 1,072
ResidencyThe GroupAmortised cost FVOCI FVTPL2023 €000 €000 €000Malta 1,640,610 75,951 - Monetary Union member states 2,328,493 - 15 Rest of the world 1,297,855 - 27 5,266,958 75,951 42
The GroupAmortised cost FVOCI FVTPL2022 €000 €000 €000Malta 1,177,576 82,210 1,040 Monetary Union member states 1,932,275 - 10 Rest of the world 1,357,582 - 22 4,467,433 82,210 1,072
Notes to the financial statements
for the year ended 31 December 2023
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131
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.1 Credit Quality (continued)
Loans and advances to customers analysed into performing and non-performing exposures.
The Group The GroupOf which Of which Total Gross/Forborne Exposures TotalForborne TotalForborne2023 2023 2022 2022€000 €000 €000 €000Performing Stage 1 5,633,851 - 4,998,276 - Stage 2 457,190 138,655 569,137 172,474 6,091,041 138,655 5,567,413 172,474 Non-performing Stage 3 192,399 87,438 204,305 93,135 192,399 87,438 204,305 93,135 Total Gross/Forborne Exposures 6,283,440 226,093 5,771,718 265,609
Gross Forborne Exposures are analysed as follows:
Modification Modification in Terms Refinancingin Terms Refinancing2023 2023 2022 2022Performing €000 €000 €000 €000Personal 12,593 167 15,372 219 Business 124,634 1,261 155,632 1,251 137,227 1,428 171,004 1,470 Non-performing Personal 14,829 681 19,941 469 Business 64,746 7,182 65,623 7,102 79,575 7,863 85,564 7,571
The movement in forbearance activity during the period is as follows:
Loans & Advances 2023 2022€000 €0001 January 265,609 279,165 Additions 62,326 46,558 Retired from forborne (101,842) (60,114)31 December 226,093 265,609 Analysis of past due balancesPast due up to 29 days 82,664 63,193 Past due 30 - 59 days 4,942 5,845 Past due 60 - 89 days 6,870 2,139 94,476 71,177
Notes to the financial statements
for the year ended 31 December 2023
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132
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.1 Credit Quality (continued)
Analysis of past due balances comprise all loan exposures (including forborne exposures).
A financial asset is past due when a counterparty has failed to make a payment when contractually due.2023 2022€000 €000Defaulted gross loans by segment: Business 154,342 155,105 Personal 38,057 49,200 192,399 204,305
Defaulted facilities are those credit facilities with payments of interest and/or capital overdue by 90 days or more or where the Group
has reasons to doubt the eventual recoverability of funds. A variety of types of collateral are accepted including property, securities,
cash, guarantees and insurance, as disclosed in note 39.2.1.5.
Information about impairment allowances is disclosed in note 39.2.1.2 in respect of the Group’s exposures as at 31 December 2023
and 31 December 2022.
39.2.1.2 Expected credit loss measurement
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial recognition as summarised below:
• A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1 and has its credit risk continuously
monitored by the Group.
• If a significant increase in credit risk (SICR) since initial recognition is identified, the financial instrument is moved to Stage 2 but is
not yet deemed to be credit-impaired. Refer to note 39.2.1.2.1 for a description of how the Group determines when a significant
increase in credit risk has occurred.
• If the financial instrument is credit-impaired, the financial instrument is then moved to Stage 3. Refer to note 39.2.1.2.2 for a
description of how the Group defines credit-impaired and default.
• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses that
result from default events possible within the next 12 months. Instruments in Stages 2 and 3 have their ECL measured based on
expected losses on a lifetime bases. Refer to note 39.2.1.2.4 for a description of inputs, assumptions and estimation techniques
used in measuring the ECL.
• A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward-looking information. Note
39.2.1.2.5 includes an explanation of how the Group has incorporated this in its ECL models.
Further explanation is also provided of how the Group determines appropriate groupings when ECL is measured on a collective basis
(refer to note 39.2.1.2.8).
The following diagram summarises the impairment requirements under IFRS 9 (other than purchased or originated credit-impaired
financial assets):
Change in credit quality since initial recognition
Stage 1 Stage 2 Stage 3
(Initial recognition) (Significant increase in credit risk since
initial recognition)
(Credit-impaired assets)
12-month expected credit losses Lifetime expected credit losses Lifetime expected credit losses
Notes to the financial statements
for the year ended 31 December 2023
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133
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2 Expected credit loss measurement (continued)
39.2.1.2.1 Significant increase in credit risk
With the exception of instruments measured at FVTPL, exposures with low credit risk at the reporting date and any originated credit-
impaired financial assets (note 39.2.1.2.2), the Group assesses whether financial instruments have experienced a significant increase
in credit risk since initial recognition.
When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group
considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Group’s historical experience and expert credit assessment and
including forward-looking information. A quantitative backstop trigger (30 days in arrears) shift exposures from stage 1 to stage 2 as
significant increase in credit risk is deemed to have occurred.
The Group allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of
default and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are
indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower.
Following the introduction of a new Internal Credit Rating system (ICRS) for the business portfolio in December 2022, during the year,
the Bank also implemented ICRS on the retail portfolio which aided in enhancing granularity and differentiates credit risk through
more gradings avoiding concentration in a few grades.
Stage Allocation
At the origination of a loan, all exposures (except for POCI), irrelevant of the credit grading, are allocated to stage 1 as the Bank accepts
the credit risk profile at an agreed price. It follows that 12 months of expected credit losses are held against newly originated loans
as long as the credit risk at origination does not increase significantly. A transfer to stage 2 is only triggered when SICR, compared to
the credit risk at origination, occurs. Assessment of SICR has been enhanced to include a comparative assessment between the PD at
a point in time and that at origination to determine whether credit risk has increased over time. The Bank also makes use of a second
backstop trigger for SICR. The latter pushes exposures to underperforming (stage 2) whenever the PD is found to have doubled that
at origination.
 
Exposures are subject to ongoing qualitative monitoring, which may also result in an exposure being moved to a different credit risk
grade. The monitoring typically involves use of the following data.
Commercial exposures Personal exposures All exposures
• Information obtained during periodic
review of customer files - e.g. audited
financial statements, management
accounts, budgets and projections.
Examples of areas of particular focus
are: gross profit margins, financial
leverage ratios, debt service coverage,
compliance with covenants, quality
of management, senior management
changes
• Actual and expected significant
changes in the political, regulatory
and technological environment of the
borrower or in its business activities
• Internally collected data on customer
behaviour - e.g. utilisation of credit
card facilities
• Affordability metrics
• Payment record - this includes
overdue status as well as a range of
variables about payment ratios
• Utilisation of the granted limit
• Requests for and granting of
forbearance
• Existing and forecast changes in
business
• Financial and economic conditions
The Group applies the low credit risk simplification for all investments which are of an investment grade, which comprises the vast
majority of its treasury portfolio. The Group accordingly only assesses SICR for investments in those debt securities which are rated as
sub-investment grade. For sub-investment grade securities, the Group considers a security to have experienced a significant increase
in credit risk if the security has been the subject to a credit rating downgrade since initial recognition.
Effective June 2022, all post model adjustments triggered by COVID-19 pandemic totalling to €24.9 million were reversed.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
134
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.1 Significant increase in credit risk (continued)
Other economic uncertainties and their impact on credit quality
Impact of the Russian/Ukrainian Crisis on Expected Credit Losses
An extensive exercise was carried out in the prior year by the Bank’s Business and Risk units to identify the areas of risk emanating
from the Russian/ Ukrainian conflict and the possible impacts to the Bank’s business. Three potential areas of increased risk were
identified:
- Directly impacted exposures who are directly impacted by the sanctions and measures put in place due to this conflict. The Bank
has undergone an exercise to identify these, and the outcome was that no customers are directly impacted by the conflict as the
Bank does not have a large amount of Russian or Ukrainian nationals and all of them are based in Malta.
- Secondary-impacted sectors are those sectors deemed as exposed to a high or medium risk given the industry in which they
operate in and how the prices and availability of materials might have been impacted by this conflict.
- Macro-economic impact namely due to Inflationary pressures.
By virtue of this analysis, it was concluded that there are no indicators to substantiate an increase in specific risk emanating from the
Russia/Ukraine war. The Bank will continue monitoring any developments within this area.
From a more macro-outlook, the share of Malta’s import of goods from Russia and Ukraine is minimal at less than 1% of imports
originating from these countries. Most imports from Russia and Ukraine are of an agriculture and fuel nature. The rise in fuel prices
has not been felt by the general consumer as fuel prices are currently being fixed by the Government.
Likewise, Malta’s share of exports to these countries also stands at less than 1% and hence, is negligible.
39.2.1.2.2 Definition of default and credit impaired
The Group considers financial assets in the advances portfolio to be in default when:
• the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising
security (if any is held); or
• the borrower is past due more than 90 days on any credit obligation to the Group.
Overdrafts are considered as being past due once the customer has breached an advised limit or been advised of a limit lower than
the current amount outstanding.
In assessing whether a borrower is in default, the Group considers indicators that are:
• qualitative – e.g. breaches of covenant;
• quantitative – e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and
• based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes
in circumstances.
The definition of default aligns with that applied by the Group for regulatory capital purposes.
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt financial assets carried at
FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or past due event;
• the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
• it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless
there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of
impairment. In addition, a retail loan that is overdue for 90 days or more is considered impaired.
In the case of the treasury portfolio, the Group considers investments in debt instruments to be in default when a payment, including
a coupon payment, is missed.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
135
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.3 Cure rate
An instrument in the Group’s advances portfolio is considered to be no longer in default (i.e. to have cured) when it no longer meets
any of the default criteria for a consecutive period of three months. This period of three months has been determined based on an
analysis which considers the likelihood of a financial instrument returning to default status after cure using different possible cure
definitions.
A forborne instrument is considered to no longer be in default when it no longer meets any of the criteria for a consecutive period
of twelve months.
The Group’s experience is that defaulted debt investments within the treasury portfolio do not cure given that a security’s default
mechanism is triggered when a security’s issuer misses a coupon payment. Any new instruments which the Group receives as part of
an eventual debt restructuring exercise is considered to be a new instrument altogether.
39.2.1.2.4 Measuring ECL
The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or Lifetime basis depending on whether a significant increase
in credit risk has occurred since initial recognition or whether an asset is considered to be credit impaired. Expected credit losses
are the discounted product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as
follows:
- The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-
impaired” above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
- EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or over
the remaining lifetime (Lifetime EAD). For example, for a revolving overdraft, the Group includes the current drawn balance plus
any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.
- LGD represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty,
type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of
exposure at the time of default (EAD). LGD is calculated on a 12 month or lifetime basis, where 12-month LGD is the percentage
of loss expected to be made if the default occurs in the next 12 months and Lifetime LGD is the percentage of loss expected to
be made if the default occurs over the remaining expected lifetime of the loan.
The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure or collective
segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid
or defaulted in an earlier month). This effectively calculates an ECL for each future month, which is then discounted back to the
reporting date and summed. The discount rate used in the ECL calculation is the original effective interest rate or an approximation
thereof.
These parameters are generally derived from internally developed statistical models and other historical data. They are adjusted to
reflect forward-looking information as described in note 39.2.1.2.5.
PD estimates are estimates at a certain date, which are calculated based on statistical rating models, and assessed using rating tools
tailored to the various categories of counterparties and exposures. These statistical models are based on internally compiled data
comprising both quantitative and qualitative factors. Where it is available, market data may also be used to derive the PD for large
corporate counterparties. If a counterparty or exposure migrates between rating classes, then this will lead to a change in the estimate
of the associated PD. PDs are estimated considering the contractual maturities of exposures and estimated prepayment rates.
The Group derives the EAD from the current exposure to the counterparty and potential changes to the current amount allowed
under the contract including amortisation. The EAD of a financial asset is its gross carrying amount. For lending commitments and
financial guarantees, the EAD includes the amount drawn, as well as potential future amounts that may be drawn under the contract,
which are estimated based on historical observations and forward-looking forecasts. For some financial assets, EAD is determined by
modelling the range of possible exposure outcomes at various points in time using scenario and statistical techniques.
The Group estimates LGD parameters on its advances portfolio based on historical data sets of property contractual prices and
recovered claims against defaulted counterparties. From this data, future property prices are estimated, which are then discounted
to allow for costs to sell and time to sell. Net realisable values are discounted using the individual exposure’s interest rate. The LGD
models consider the structure, collateral, seniority of the claim, counterparty industry and recovery costs of any collateral that is
integral to the financial asset. In the case of the Group’s treasury portfolio, the Group lacks historical experience of defaults, and
accordingly makes use of the LGD parameters set out by the Bank for International Settlements.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
136
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.4 Measuring ECL (continued)
As described above, and subject to using a maximum of a 12-month PD for financial assets for which credit risk has not significantly
increased, the Group measures ECL considering the risk of default over the maximum contractual period (including any borrower’s
extension options) over which it is exposed to credit risk, even if, for risk management purposes, the Group considers a longer
period. The maximum contractual period extends to the date at which the Group has the right to require repayment of an advance or
terminate a loan commitment or guarantee.
However, for retail overdrafts and credit card facilities that include both a loan and an undrawn commitment component, the Group
measures ECL over a period longer than the maximum contractual period if the Group’s contractual ability to demand repayment and
cancel the undrawn commitment does not limit the Group’s exposure to credit losses to the contractual notice period. These facilities
do not have a fixed term or repayment structure and are managed on a collective basis. The Group can cancel them with immediate
effect but this contractual right is not enforced in the normal day-to-day management, but only when the Group becomes aware of
an increase in credit risk at the facility level. This longer period is estimated taking into account the credit risk management actions
that the Group expects to take and that serve to mitigate ECL. These include a reduction in limits, cancellation of the facility and/or
turning the outstanding balance into a loan with fixed repayment terms.
39.2.1.2.5 Forward-looking information
The assessment of SICR and the calculation of ECL both incorporate forward-looking information. The Group has performed historical
analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio.
These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. Quarterly Central Bank
of Malta (CBM) forecasts for those macro-economic factors, that are found to be relevant for the Bank’s credit portfolio, are used. On
an annual basis, as part of the model recalibration exercise an assessment is carried out to ensure that the selected macro-economic
model is still adequate and relevant.
The impact of these economic variables on the PD, EAD and LGD has been determined by performing statistical regression analysis
to understand the impact changes in these variables have had historically on default rates and on the components of LGD.
As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different to those projected. The Group considers these forecasts to represent its
best estimate of the possible outcomes.
As at 31 December 2023, the IFRS 9 model was updated with the Central Bank of Malta (CBM) Quarter 4, 2023 baseline macro-
economic projections for the period 2023 to 2025 for GDP growth and unemployment.
The calibrated model includes three scenarios (base/optimistic/pessimistic) whereby the baseline scenarios are mapped to the
economic forecasts published quarterly by the Central Bank of Malta for Unemployment rate, and bi-annually in the Budgetary Plan
and the Update of Stability Program for GDP growth rate issued by the Ministry for Finance and Employment.
The upside and downside scenarios are then derived as follows:
• The Budgetary Plan and the Update of Stability Program publish upside and downside scenarios for real GDP growth (GDP fan
chart);
• Okun’s law is used to derive the upside and downside scenarios for Unemployment rate. Okun’s law prescribes a presumably
stable economic relationship between the Unemployment rate and GDP growth rate;
The following table compares the three key forecasts as per CBM issue Quarter 4: 2022 to those issued by the CBM in Quarter 4:
2023.
December 22 CBM Forecasts December 23 CBM Forecasts2022 2023 2024 2025 2023 2024 2025Macro-variable % % % % % % %GDP 6.8 3.7 3.6 3.5 4.3 3.8 3.6 Inflation* 6.1 4.5 2.3 2.0 - - - Unemployment 3.0 3.0 3.2 3.3 2.8 2.9 2.9
*In the current year, the forecast for inflation rate was excluded from the PD model, as further disclosed in note 39.2.1.2.6.
Management adjustments to models for impairment
Management adjustments to impairment models are applied in order to factor in certain conditions or changes in policy that are not
fully incorporated into the impairment models, or to additional facts and circumstances at the period end. Management adjustments
are reviewed and incorporated into future model development where applicable.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
137
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.5 Forward-looking information (continued)
Post-model adjustments due to long-outstanding non-performing exposures
A total of €19.6 million (2022: €37.8 million) are held as post-model adjustments related to non-performing exposures, thereby
releasing €18.2 million arising mainly from the NPL Sale derecognition and write-offs (note 8.2). The remaining movement reflects
changes in portfolio.
Effective June 2022, all post model adjustments triggered by COVID-19 pandemic totalling to €24.9 million were reversed.
The long-outstanding/legacy non-performing exposures are considered as very high-risk exposures with a high degree of uncertainty
associated with the realisation of their collateral. For this group of exposures time to sell is longer than normally expected resulting in
additional costs to maintain the assets in a good and saleable condition. For these types of exposures, it is also highly probable that the
debt is realised through court proceedings and hence, further legal costs would be incurred. Taking all these factors into consideration,
the Bank is of the view that an additional independent analysis, from the LGD model is necessary to estimate the adequate ECL
coverage for this group of exposures with an intention to improve the coverage.
39.2.1.2.6 Critical estimates
The most significant key macro-economic variables used for the ECL estimate as at 31 December 2023 are set out below.
As part of the annual calibration exercise, the IFRS 9 model has been updated to include a revised mix of macro-economic variables
(Gross domestic product and unemployment rate) to make the model more intuitive and reflective of the current economic conditions.
The macro-economic model includes GDP growth rate and year on year difference in Unemployment rate for both retail and business
portfolio. The credit cycle coefficients together with their relative weights in the credit cycle are summarized in the table below:
Macro-economic credit-cycle for Retail and Business portfolio:
2023Variable Retail Weights Business WeightsGDP Growth -0.0083 52.05% -0.0174 54.72%Unemployment Rate 0.0789 47.95% 0.1480 45.28%
2022Variable Retail Weights Business WeightsGDP Growth -0.0043 44.19% -0.0157 41.01%Unemployment Rate 0.0535 54.29% 0.1450 37.09%Inflation Rate 0.0008 1.52% 0.0441 21.90%
The GDP is proven to be a universal variable capturing the overall state of the economy and as such it has an important role in both
Retail and Business segments. The unemployment rate has a slightly higher impact on Retail than on Business, which is in line with
expectations. During this year’s calibration, HICP inflation was dropped from both the retail and business models as the model
coefficient no longer follows intuitive expectation and the variable remains highly insignificant in both models.
A review of the most significant key macro-economic variables is performed on an annual basis.
Three scenarios “baseline”, “downside” and “upside” were used for all loan portfolios.
Macro-economic forecasts (2023-2025) Downside Baseline Upside% % %GDP Growth rate 1.2 3.9 6.9Unemployment rate 3.3 2.9 2.4Probability (%) 25.0 50.0 25.0
Other forward-looking considerations not incorporated within the above scenarios, such as the impact of any regulatory, legislative,
or political changes, have also been considered, but are not deemed to have a material impact. This is reviewed and monitored for
appropriateness on a quarterly basis.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
138
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.7 Sensitivity of ECL to future economic conditions
ECL is sensitive to judgements and assumptions made regarding formulation of forward-looking scenarios and how such scenarios
are incorporated into the calculations.
A sensitivity analysis is performed on the ECL requirement for the credit portfolio, assuming the upside and downside forward-looking
scenarios as the baseline and weighted at 100% instead of applying an unbiased set of probability weights.
2023€000Gross performing exposures 6,091,041 ECL variance - Upside (2,273) - Downside 2,485
Applying a baseline scenario would approximate the probability weighted scenario.
The Group performed additional ECL runs to sensitise expected credit loss requirements to changes in the impact of macro-variable
inputs and their impact on projected PD curves. The most significant change in ECL resulting from shifts in macro variable inputs is
coming from unemployment since, over the past 10 years unemployment has been gradually decreasing and applying an abrupt shift
upwards would cause a shock to the model. A higher unemployment rate would result in a significant impact on the purchasing power
and hence on the borrowers’ ability to meet its contractual obligations.
Set out below are the changes to ECL as at 31 December 2023 that would result from changes in parameters from the actual
observations. The most significant sensitivity tests affecting the ECL allowance are as follows:
Macro-variable Shift in basis points Increase in ECL€000Unemployment +150 2,516 Gross Domestic Product -250 475
39.2.1.2.8 Grouping by shared risk characteristics
Where modelling of a parameter is carried out on a collective basis, the financial instruments are grouped on the basis of shared risk
characteristics that include:
- instrument type;
- credit risk gradings;
- collateral type;
- LTV ratio for retail mortgages;
- date of initial recognition;
- remaining term to maturity;
- industry; and
- geographic location of the borrower.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
139
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.2.8 Grouping by shared risk characteristics (continued)
The groupings are subject to regular review to ensure that exposures within a particular group remain appropriately homogeneous.
As at December 2023 Exposure External benchmarks usedLGDInvestments in debt securities within the € 5,343,807 16% - 59%treasury portfolioBank for International Settlements parameters
As at December 2022 Exposure External benchmarks usedLGDInvestments in debt securities within the € 4,550,212 14% - 59%treasury portfolioBank for International Settlements parameters
Majority of the instruments are of an investment grade and as such the Bank has applied simplification rules as permitted by IFRS 9.
39.2.1.3 Gross carrying amount and exposure to credit risk
The following table sets out information about the credit quality of financial assets measured at amortised cost, and FVOCI debt
investments. Unless specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts.
Explanation of the terms: 12-month ECL, lifetime ECL and credit-impaired are included in note 39.2.1.1.
Stage 2 Stage 3 Stage 1 Lifetime ECL Lifetime 12-month not Credit-ECL Credit- ECLImpairedImpaired Total€000 €000 €000 €000Loans and advances to banks at amortised costAs at 31 December 2023AAA 2,278,169 - - 2,278,169 AA- to AA+ 30,774 - - 30,774 A- to A+ 109,621 - - 109,621 BBB- to BBB+ 45,656 - - 45,656 Lower than BBB- - 9,537 - 9,537 Unrated 241 - - 241 2,464,461 9,537 - 2,473,998 Loss allowance (4) (17) - (21)Carrying amount 2,464,457 9,520 - 2,473,977 Loans and advances to banks at amortised costAs at 31 December 2022AAA 3,069,417 - - 3,069,417 AA- to AA+ 46,845 - - 46,845 A- to A+ 422,918 - - 422,918 BBB- to BBB+ 68,683 - - 68,683 Lower than BBB- - 9,454 - 9,454 Unrated 80,759 - - 80,759 3,688,622 9,454 - 3,698,076 Loss allowance (10) (19) - (29)Carrying amount 3,688,612 9,435 - 3,698,047
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
140
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.3 Gross carrying amount and exposure to credit risk (continued)
The Group makes use of external ratings based on major rating agencies.
Stage 2 Stage 3 Stage 1 Lifetime ECL Lifetime 12-month not Credit-ECL Credit- ECLImpairedImpaired Total€000 €000 €000 €000Loans and advances to customers at amortised costAs at 31 December 2023Grades 1-3 5,401,738 41,013 12 5,442,763 Grades 4-5 166,808 416,177 6 582,991 Grades 6-11 - - 192,381 192,381 5,568,546 457,190 192,399 6,218,135 Loss allowance (12,186) (17,872) (73,488) (103,546)Carrying amount 5,556,360 439,318 118,911 6,114,589 Loans and advances to customers at amortised costAs at 31 December 2022Grades 1-3 4,811,994 18,462 60 4,830,516 Grades 4-5 107,557 550,675 31 658,263 Grades 6-11 - - 204,214 204,214 4,919,551 569,137 204,305 5,692,993 Loss allowance (16,486) (13,495) (102,936) (132,917)Carrying amount 4,903,065 555,642 101,369 5,560,076
Exposures under probation or which experienced a deterioration in stage subject to the doubling of the PD result in an ECL stage
which is worse than the stage related to their internal grading.
Exposures graded 4 and 5 and allocated in Stage 1 comprise of newly originated business exposures. (Refer to 39.2.1.2.1 – Stage
Allocation).
The following table represents the average 12-month PD corresponding to the internal credit grading.
Grading 12-month average PDGrades 1 - 3 0.037 Grades 4 - 5 0.339 Grades 6 - 11 1.000
Stage 2 Stage 3 Stage 1 Lifetime ECL not Lifetime ECL 12-month ECLcredit-Impairedcredit-Impaired Total€000 €000 €000 €000Investments in debt securitiesAs at 31 December 2023AAA 987,491 - - 987,491 AA- to AA+ 1,033,085 - - 1,033,085 A- to A+ 2,783,477 - - 2,783,477 BBB- to BBB+ 534,228 - - 534,228 Lower than BBB- - 5,526 - 5,526 5,338,281 5,526 - 5,343,807 Loss allowance (836) (62) - (898)Carrying amount 5,337,445 5,464 - 5,342,909
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
141
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.3 Gross carrying amount and exposure to credit risk (continued)
Stage 2 Stage 3 Stage 1 Lifetime ECL not Lifetime ECL 12-month ECLCredit-ImpairedCredit- Impaired Total€000 €000 €000 €000Investments in debt securitiesAs at 31 December 2022AAA 1,221,249 - - 1,221,249 AA- to AA+ 820,073 - - 820,073 A- to A+ 2,103,870 - - 2,103,870 BBB- to BBB+ 383,683 - - 383,683 Lower than BBB- - 21,337 - 21,337 4,528,875 21,337 - 4,550,212 Loss allowance (450) (119) - (569)Carrying amount 4,528,425 21,218 - 4,549,643
The treasury portfolio is made up primarily of investment grade securities.
39.2.1.4 Maximum exposure to credit risk on FVTPL securities, Financial guarantees and loan commitments
Maximum exposure
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the
maximum exposure to credit risk without taking account of the value of any collateral obtained, except as disclosed below.
Financial guarantees
The maximum exposure to credit risk is the full amount that the Group would have to pay if the guarantees are called upon (note 33).
Loan commitments
The maximum exposure to credit risk arising on loan commitments and other credit related commitments that are irrecoverable over
the life of the respective facilities is the full amount of the committed facilities (note 34).
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment (i.e.
FVTPL):Maximum exposure to credit risk2023 2022€000 €000Financial assets mandatorily measured at FVTPL:- Debt securities 21 26 21 26 Financial assets designated at fair value:- Debt securities 21 1,046 - Loans and advances to customers 65,305 78,725 65,326 79,771 65,347 79,797 Derivatives financial instruments 7,922 28,866
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
142
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.5 Collateral
The Group employs a range of policies and practices to mitigate credit risk. The most common of these is accepting collateral for funds
advanced. The Group has internal policies on the acceptability of specific classes of collateral or credit risk mitigation. The principal
collateral types for loans and advances are:
• Mortgages over residential properties;
• Charges over business assets such as premises, inventory and accounts receivable;
• Charges over financial instruments such as debt securities and equities; and
• Margin agreement for derivatives, for which the Group has master netting agreements imposed by way of law.
Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are generally unsecured.
Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. Debt securities,
treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which
are secured by portfolios of financial instruments. Derivatives are also collateralised.
The Group’s policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no
significant change in the overall quality of the collateral held by the Group since the prior period.
A portion of the Group’s financial assets originated by the mortgage business has sufficiently low ‘loan to value’ (LTV) ratios, which
results in no loss allowance being recognised in accordance with the Group’s expected credit loss model. The carrying amount of such
financial assets is €396.5 million as at 31 December 2023 (2022: €398.5 million).
Security values are reviewed on a regular basis and are also re-assessed at time of default if it is found that the carrying value of the
collateral item could have materially changed since last valuation. The Bank calculates the value of collateral as the market value less a
haircut, with the latter representing a conservative estimate of the costs to sell and the potential loss of value in a forced sale scenario.
For financial instruments, haircuts are calculated according to the risk profile of each individual security and depend on a number of
variables including price volatility and liquidity/marketability of the instrument.
The table below shows the financial effect and main types of collateral held against the Group’s customer loan exposures:
The GroupAs at 31 December 2023Undrawn credit facilities Loans and advances to and other commitments to customerslend€000 €000Loans collateralised by:Prime bank guarantees 445 161 Cash or quasi cash 125,646 45,427Guarantees and/or letters of comfort issued by the Malta Government, 386,519 139,743the Central Bank of Malta or Public agenciesResidential property 2,934,010 1,060,782Commercial property 1,363,330 492,908Personal guarantees and others 396,162 143,2315,206,112 1,882,252
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
143
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.5 Collateral (continued)
The GroupAs at 31 December 2022Undrawn credit facilities Loans and advances to and other commitments to customerslend€000 €000Loans collateralised by:Prime bank guarantees 438 143 Cash or quasi cash 84,449 27,616 Guarantees and/or letters of comfort issued by the Malta Government, 541,494 116,397 the Central Bank of Malta or Public agenciesResidential property 2,652,625 867,453 Commercial property 1,228,490 401,737 Personal guarantees and others 257,623 144,927 4,765,119 1,558,273
The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that the
Group will take possession of collateral to mitigate potential credit losses. Financial assets that are credit-impaired and related collateral
held in order to mitigate potential losses are shown below:
The GroupAs at 31 December 2023Fair value of collateral held Gross carrying Impairment Net carrying post haircut as amountallowanceamountper model€000 €000 €000 €000Credit-impaired assetsLoans to individuals:- Personal Loans 4,472 (2,807) 1,665 2,572 - Home Loans 32,118 (13,532) 18,586 28,810 - Personal Overdrafts 105 (95) 10 125 - Credit Cards 389 (379) 10 - Loans to corporate entities:- Business Loans 123,810 (38,557) 85,253 98,019 - Business Overdrafts 25,716 (12,334) 13,382 27,097 Encroachments* 5,789 (5,784) 5 - Total credit-impaired assets 192,399 (73,488) 118,911 156,623
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
144
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.1 Credit risk management and exposure (continued)
39.2.1.5 Collateral (continued)
The GroupAs at 31 December 2022Fair value of collateral held Gross carrying Impairment Net carrying post haircut as amountallowanceamountper model€000 €000 €000 €000Credit-impaired assetsLoans to individuals:- Personal Loans 6,033 (4,586) 1,447 2,362 - Home Loans 42,405 (24,223) 18,182 35,379 - Personal Overdrafts 510 (473) 37 156 - Credit Cards 253 (168) 85 - Loans to corporate entities:- Business Loans 126,552 (56,941) 69,611 103,738 - Business Overdrafts 27,431 (15,432) 11,999 40,070 Encroachments* 1,121 (1,113) 8 - Total credit-impaired assets 204,305 (102,936) 101,369 181,705 * Encroachments include exposures which form part of both loans to individuals and corporate entities.
On specific exposures, the fair value of the collateral exceeds the carrying amount of the loan. The value of the collateral in this note
is capped to the gross carrying amount of the exposures.
The impairment allowances on the credit-impaired assets comprises model driven expected credit loss amounting to €53.9 million
(2022: €65.1 million) and post model adjustments €19.6 million (2022: €37.8 million). Refer to note 39.2.1.2.5.
Fair value of collateral refers to architect’s valuation less applicable haircuts.
Collateral valuations vary from full valuations by external independent appraisers to desktop valuations according to the Bank’s
collateral policy. The frequency of collateral valuations range between 1 and 3 years depending on the type of property, exposure
status (i.e. whether performing or non-performing) as well as exposure range in line with the Bank’s collateral policy.
Lending and Commitments covered by Residential Property
The table below stratifies credit exposures, covered by residential property, to customers by ranges of loan-to-value (‘LTV’). LTV is
calculated as the ratio of the gross amount of loan or the amount committed for loan commitments to the value of the collateral. The
gross amounts exclude any impairment allowances. The valuation of the collateral excludes any adjustments for obtaining and selling
the collateral. The value of the collateral for these loans is based on the collateral value at origination updated based on changes in
house price indices.Lending and commitments covered by residential property2023 2022€000 €000Less than 25% 475,121 364,125 25% to 50% 1,482,823 1,217,317 51% to 75% 1,300,456 1,011,173 76% to 90% 750,984 755,132 91% to 100% 30,924 10,964 4,040,308 3,358,711
The following table classifies the Group’s mortgage credit-impaired exposures which are covered by residential property by ranges of
loan-to-value (LTV). The value of collateral for these loans is calculated by taking into consideration the eligibility of collateral pursuant
to Article 208 of the Capital Requirement Regulation.
2023 2022Credit-Impaired (Gross Credit-Impaired (Gross Mortgage portfolio - LTV distributioncarrying amount)carrying amount)€000 €000Lower than 25% 5,120 4,084 25% to 50% 10,467 12,299 51% to 75% 3,270 4,060 76% to 90% 1,238 711 Total 20,095 21,154
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
145
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures
39.2.2.1 Reconciliation of ECL
The following tables explain the changes in the loss allowance between the beginning and the end of the annual period due to the
following factors:
• Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases)
of credit risk or becoming credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month
and Lifetime ECL. Changes in the staging allocation of balances existing at 1 January 2023 (and associated ECL changes) are
presented in “transfers to/(from)”, whereas subsequent changes in the staging allocation of new assets originated during the year
are presented in “new financial assets originated”;
• Additional allowances for new financial instruments recognised during the period, as well as releases for financial instruments
derecognised in the period;
• Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular refreshing of inputs
to models;
• Impacts on the measurement of ECL due to changes made to models and assumptions;
• Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis;
• Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and
• Financial assets derecognised during the period and write-offs of allowances related to assets that were written off during the
period (see note 39.2.2.4)
 
Allowances on On-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total allowances at 1 January 2023 16,486 13,495 102,936 132,917 Home LoansAllowances at 1 January 2023 1,128 614 24,222 25,964 Transfer to/(from): Stage 1 (3) 12 348 357 Stage 2 9 (394) 119 (266) Stage 3 1 33 (962) (928)New financial assets originated* 278 19 20 317 Financial assets that have been derecognised (80) (106) (2,207) (2,393)Write-offs - - (872) (872)NPL Sale - - (8,162) (8,162)Changes to model assumptions and methodologies (850) (110) 129 (831) Other movements** (55) 12 897 854Allowances on home loans at 31 December 2023 428 80 13,532 14,040 PersonalAllowances at 1 January 2023 903 282 5,060 6,245 Transfer to/(from): Stage 1 (357) 546 365 554 Stage 2 31 (192) 68 (93) Stage 3 - 18 (189) (171)New financial assets originated* 479 208 657 1,344 Financial assets that have been derecognised (82) (42) (567) (691)Write-offs - - (207) (207)NPL Sale - - (1,463) (1,463)Changes to model assumptions and methodologies (339) 219 10 (110) Other movements** 248 (214) 137 171Allowances on personal at 31 December 2023 883 825 3,871 5,579
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
146
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.1 Reconciliation of ECL (continued)
Allowances on On-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Credit CardsAllowances at 1 January 2023 1,502 334 167 2,003 Transfer to/(from): Stage 1 (190) 578 168 556 Stage 2 43 (143) 105 5 Stage 3 - 10 (48) (38)New financial assets originated* 47 32 6 85 Financial assets that have been derecognised (48) (25) (36) (109)Changes to model assumptions and methodologies (590) 349 - (241) Other movements** 51 (294) 17 (226)Allowances on credit cards at 31 December 2023 815 841 379 2,035Business Allowances at 1 January 2023 12,953 12,265 73,487 98,705 Transfer to/(from): Stage 1 (887) 5,149 10,082 14,344 Stage 2 112 (2,537) 9,772 7,347 Stage 3 6 9 (2,417) (2,402)New financial assets originated* 4,272 4,887 7,062 16,221 Financial assets that have been derecognised (870) (678) (8,869) (10,417)Write-offs - - (3,738) (3,738)NPL Sale - - (23,076) (23,076)Changes to model assumptions and methodologies (4,232) (730) 3,909 (1,053)Other movements** (1,294) (2,239) (10,506) (14,039)Allowances on business at 31 December 2023 10,060 16,126 55,706 81,892Total allowances at 31 December 2023 12,186 17,872 73,488 103,546
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
147
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.1 Reconciliation of ECL (continued)
Allowances on On-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total allowances at 1 January 2022 23,940 19,789 120,056 163,785 Home LoansAllowances at 1 January 2022 1,349 536 26,116 28,001 Transfer to/(from): Stage 1 (1) 126 678 803 Stage 2 9 (154) 181 36 Stage 3 - 30 (511) (481)New financial assets originated* 718 371 - 1,089 Financial assets that have been derecognised (77) (84) (1,492) (1,653)Write-offs - - (917) (917)Changes to model assumptions and methodologies 203 378 (298) 283 Post-Model Adjustments - - (3,139) (3,139)Other movements** (1,073) (589) 3,604 1,942 Allowances on home loans at 31 December 2022 1,128 614 24,222 25,964 PersonalAllowances at 1 January 2022 608 829 5,163 6,600 Transfer to/(from): Stage 1 (3) 51 148 196 Stage 2 23 (670) 121 (526) Stage 3 1 14 (176) (161)New financial assets originated* 302 83 589 974 Financial assets that have been derecognised (54) (34) (701) (789)Write-offs - - (86) (86)Changes to model assumptions and methodologies (206) (11) 13 (204)Post-Model Adjustments - - (111) (111)Other movements** 232 20 100 352 Allowances on personal at 31 December 2022 903 282 5,060 6,245 Credit CardsAllowances at 1 January 2022 1,331 404 469 2,204 Transfer to/(from):Stage 1 (60) 157 19 116 Stage 2 96 (227) 45 (86)Stage 3 5 15 (159) (139)New financial assets originated* 74 13 16 103 Financial assets that have been derecognised (40) (34) (189) (263)Changes to model assumptions and methodologies (822) (70) - (892)Other movements**918 76 (34) 960 Allowances on credit cards at 31 December 20221,502 334 167 2,003
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
148
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.1 Reconciliation of ECL (continued)
Provisions on Off-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total Provisions at 1 January 2023 6,569 2,335 6,574 15,478 Home LoansProvisions at 1 January 2023 456 320 493 1,269 Transfer to/(from): Stage 1 (4) - 351 347 Stage 2 20 (152) - (132) Stage 3 - - (413) (413)New financial assets originated* 438 - 249 687 Financial assets that have been derecognised (38) (168) (1) (207)Changes to model assumptions and methodologies (430) 15 1 (414)Other movements** 53 (15) (2) 36Provisions on home loans at 31 December 2023495 - 678 1,173 Personal Provisions at 1 January 2023 92 30 84 206 Transfer to/(from): Stage 1 (63) 1,419 910 2,266 Stage 2 - (12) 2 (10) Stage 3 - - (10) (10)New financial assets originated* 67 9 17 93 Financial assets that have been derecognised (19) - (8) (27)Changes to model assumptions and methodologies (24) 1,529 297 1,802 Other movements** 22 (1,541) (295) (1,814)Provisions on personal at 31 December 2023 75 1,434 997 2,506
Allowances on On-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Business Allowances at 1 January 2022 20,652 18,020 88,308 126,980 Transfer to/(from): Stage 1 (2,501) 5,856 6,580 9,935 Stage 2 530 (7,729) 4,437 (2,762) Stage 37 365 (2,860) (2,488)New financial assets originated* 6,891 917 1,746 9,554 Financial assets that have been derecognised (285) (552) (13,692) (14,529)Write-offs - - (6,915) (6,915)Changes to model assumptions and methodologies 422 1,586 2,729 4,737 Post-Model Adjustments (16,664) (695) (10,679) (28,038)Other movements** 3,901 (5,503) 3,833 2,231 Allowances on business at 31 December 2022 12,953 12,265 73,487 98,705 Total allowances at 31 December 2022 16,486 13,495 102,936 132,917
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
149
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.1 Reconciliation of ECL (continued)
Provisions on Off-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Credit CardsProvisions at 1 January 2023 343 11 4 358 Transfer to/(from): Stage 1 (16) 19 5 8 Stage 2 5 (7) 2 - Stage 3 - - (2) (2)New financial assets originated* 14 1 1 16 Financial assets that have been derecognised (19) (1) (1) (21)Changes to model assumptions and methodologies (147) 5 (4) (146) Other movements** 18 (3) 3 18Provisions on credit cards at 31 December 2023 198 25 8 231 BusinessProvisions at 1 January 2023 5,678 1,974 5,993 13,645 Transfer to/(from): Stage 1 (277) 864 1,730 2,317 Stage 2 35 (230) 267 72 Stage 3 38 80 (1,849) (1,731)New financial assets originated* 4,634 547 1,086 6,267 Financial assets that have been derecognised (428) (228) (1,187) (1,843)Write-offs - - (36) (36)NPL Sale - - (120) (120)Changes to model assumptions and methodologies (2,204) 583 981 (640)Other movements** (1,442) (1,417) (1,237) (4,096)Provisions on business at 31 December 2023 6,034 2,173 5.628 13,835 Total Provisions at 31 December 2023 6,802 3,632 7,311 17,745
Provisions on Off-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total Provisions at 1 January 2022 9,676 5,560 7,061 22,297 Home LoansProvisions at 1 January 2022 617 54 764 1,435 Transfer to/(from): Stage 1 - - - - Stage 2 - (11) 1 (10) Stage 3 - - (1) (1)New financial assets originated* 426 312 403 1,141 Financial assets that have been derecognised (69) - (400) (469)Write-offs - - (54) (54)Changes to model assumptions and methodologies (731) (105) (82) (918)Post-Model Adjustments - - (265) (265)Other movements** 213 70 127 410 Provisions on home loans at 31 December 2022 456 320 493 1,269
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
150
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.1 Reconciliation of ECL (continued)
Provisions on Off-Balance Sheet Exposures Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Personal Provisions at 1 January 2022 62 20 222 304 Transfer to/(from): Stage 1 - 4 6 10 Stage 2 - (1) - (1) Stage 3 - - - - New financial assets originated* 77 9 43 129 Financial assets that have been derecognised (15) (1) (196) (212)Write-offs - - (1) (1)Changes to model assumptions and methodologies 40 (47) 7 - Post-Model Adjustments - - (123) (123)Other movements** (72) 46 126 100 Provisions on personal at 31 December 2022 92 30 84 206 Credit CardsProvisions at 1 January 2022 342 15 20 377 Transfer to/(from): Stage 1 (7) 7 1 1 Stage 2 11 (10) 1 2 Stage 3 1 - (12) (11)New financial assets originated* 19 - - 19 Financial assets that have been derecognised (17) (2) (6) (25)Changes to model assumptions and methodologies 925 106 - 1,031 Post-Model Adjustments - - (4) (4)Other movements** (931) (105) 4 (1,032)Provisions on credit cards at 31 December 2022 343 11 4 358 BusinessProvisions at 1 January 2022 8,655 5,471 6,055 20,181 Transfer to/(from): Stage 1 (197) 653 242 698 Stage 2 467 (3,011) 877 (1,667) Stage 3 7 1 (559) (551)New financial assets originated* 4,009 839 909 5,757 Financial assets that have been derecognised (1,604) (1,083) (402) (3,089)Write-offs - - (90) (90)Changes to model assumptions and methodologies 708 (2,322) 86 (1,528)Post-Model Adjustments (6,667) (101) 275 (6,493)Other movements** 300 1,527 (1,400) 427 Provisions on business at 31 December 2022 5,678 1,974 5,993 13,645 Total Provisions at 31 December 2022 6,569 2,335 6,574 15,478
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
151
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.2 Contributors to changes in provision
Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were as follows:
• Gross loans and advances increased by 9% during the year (2022: increase by 8%). The high volume of new loans originated
during the period, aligned with the Group’s organic growth objective, increased the gross carrying amount of the loan book by
18% (2022: 16%), with a corresponding €18.0 million increase in loss allowance (2022: increase of €11.7 million).
• There were no significant changes to the modification of facility contracts following renegotiation with customers facing financial
difficulties.
• The write-off of loans with a total gross carrying amount of €7.3 million (2022: €11.4 million) resulted in the reduction of the
Stage 3 expected credit losses by €4.9 million (2022: €7.9 million).
The following tables further explain changes in the gross carrying amount of the loan portfolio to help explain their significance to the
changes in the loss allowance for the same portfolio as discussed above:
Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total Gross Carrying Amount at 1 January 2023 4,998,276 569,137 204,305 5,771,718 Home LoansGross carrying amount at 1 January 2023 2,673,823 45,861 42,405 2,762,089 Transfer to/(from): Stage 1 (23,989) 18,299 4,782 (908) Stage 2 15,803 (20,178) 3,300 (1,075) Stage 3 1,869 1,125 (2,510) 484 New financial assets originated* 465,876 473 20 466,369 Financial assets that have been derecognised (123,914) (2,779) (5,069) (131,762)Write-offs - - (452) (452)NPL Sale - - (9,506) (9,506)Repayment on existing assets*** (104,278) (1,501) (852) (106,631)Home loans gross carrying amount at 31 December 2023 2,905,190 41,300 32,118 2,978,608 Personal Gross carrying amount at 1 January 2023 161,837 3,588 6,543 171,968 Transfer to/(from): Stage 1 (8,056) 1,954 540 (5,562) Stage 2 1,707 (2,043) 286 (50) Stage 3 21 110 (204) (73)New financial assets originated* 84,801 1,212 752 86,765 Financial assets that have been derecognised (15,491) (264) (60) (15,815)Write-offs - - (673) (673)NPL Sale - - (1,646) (1,646)Drawdown/(repayment) on existing assets*** (14,922) (162) 12 (15,072)Personal gross carrying amount at 31 December 2023 209,897 4,395 5,550 219,842
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
152
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.2 Contributors to changes in provision (continued)
Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Total Gross Carrying Amount at 1 January 2022 4,506,916 637,392 221,925 5,366,233 Home LoansGross carrying amount at 1 January 2022 2,442,514 50,198 47,160 2,539,872 Transfer to/(from): Stage 1 (11,844) 9,036 2,762 (46) Stage 2 10,220 (12,336) 1,717 (399) Stage 3 1,650 2,035 (3,939) (254)New financial assets originated* 447,996 2,357 - 450,353 Financial assets that have been derecognised (121,855) (2,790) (4,839) (129,484)Write-offs - - (237) (237)Repayment on existing assets*** (94,858) (2,639) (219) (97,716)Home loans gross carrying amount at 31 December 2022 2,673,823 45,861 42,405 2,762,089
Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Credit CardsGross carrying amount at 1 January 2023 43,498 4,671 253 48,422 Transfer to/(from): Stage 1 (6,323) 6,591 169 437 Stage 2 1,691 (2,136) 105 (340) Stage 3 14 71 (108) (23)New financial assets originated* 2,169 397 13 2,579 Financial assets that have been derecognised (1,435) (322) (48) (1,805)Write-offs - - - - NPL Sale - - (6) (6)Drawdown on existing assets*** 899 83 11 993 Credit cards gross carrying amount at 31 December 2023 40,513 9,355 389 50,257 Business Gross carrying amount at 1 January 2023 2,119,118 515,017 155,104 2,789,239 Transfer to/(from): Stage 1 (104,432) 73,412 34,728 3,708 Stage 2 107,016 (130,919) 14,287 (9,616) Stage 3 1,866 3,004 (4,987) (117)New financial assets originated* 444,146 24,354 11,962 480,462 Financial assets that have been derecognised (133,264) (31,556) (7,983) (172,803)Write-offs - - (6,219) (6,219)NPL Sale - - (30,170) (30,170)Drawdown/(repayment) on existing assets*** 43,801 (51,172) (12,380) (19,751)Business gross carrying amount at 31 December 2023 2,478,251 402,140 154,342 3,034,733 Total Gross carrying amount at 31 December 2023 5,633,851 457,190 192,399 6,283,440 Less Allowances (12,186) (17,872) (73,488) (103,546)Net Loans and Advances to customers 5,621,665 439,318 118,911 6,179,894
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
153
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.2 Contributors to changes in provision (continued)Stage 1 Stage 2 Stage 3 12-month ECLLifetime ECLLifetime ECL Total€000 €000 €000 €000Personal Gross carrying amount at 1 January 2022 147,898 8,550 6,621 163,069 Transfer to/(from): Stage 1 (912) 561 168 (183) Stage 2 2,969 (4,546) 437 (1,140) Stage 3 66 109 (265) (90)New financial assets originated* 44,510 402 598 45,510 Financial assets that have been derecognised (14,513) (1,079) (805) (16,397)Write-offs - - (165) (165)Repayment on existing assets*** (18,181) (409) (46) (18,636)Personal gross carrying amount at 31 December 2022 161,837 3,588 6,543 171,968 Credit CardsGross carrying amount at 1 January 2022 39,186 5,929 621 45,736 Transfer to/(from): Stage 1 (1,935) 2,300 35 400 Stage 2 3,117 (3,538) 90 (331) Stage 3 176 133 (286) 23 New financial assets originated* 2,035 192 21 2,248 Financial assets that have been derecognised (1,199) (370) (209) (1,778)Drawdown/(repayment) on existing assets*** 2,118 25 (19) 2,124 Credit cards gross carrying amount at 31 December 2022 43,498 4,671 253 48,422 BusinessGross carrying amount at 1 January 2022 1,877,318 572,715 167,523 2,617,556 Transfer to/(from): Stage 1 (145,652) 111,900 24,683 (9,069) Stage 2 117,904 (158,624) 18,299 (22,421) Stage 3 235 4,336 (5,448) (877)New financial assets originated* 327,410 13,912 7,448 348,770 Financial assets that have been derecognised (91,122) (12,122) (45,256) (148,500)Write-offs - - (10,982) (10,982)Drawdown/(repayment) on existing assets*** 33,025 (17,100) (1,163) 14,762 Business gross carrying amount at 31 December 2022 2,119,118 515,017 155,104 2,789,239 Total Gross carrying amount at 31 December 2022 4,998,276 569,137 204,305 5,771,718 Less Allowances (16,486) (13,495) (102,936) (132,917)Net Loans and Advances to customers 4,981,790 555,642 101,369 5,638,801
Gross carrying amount comprises of loans and advances to customers at amortised cost and loans and advances to customers
designated as fair value through profit or loss.
* Newly originated financial assets during the period comprises of:
- In stage 2 - business loans originate in stage 1 and deteriorate to stage 2 if they experience a significant increase in credit risk. An
exception to this arises when new accounts are opened as part of a restructuring agreement in replacement of exposures which
would have already experienced significant increase in credit risk. Retail exposures are allocated to stage 2 at origination if granted
to counterparties in stage 2 that are still subject to the Bank’s cure/probation criteria.,
- In stage 3 - include €9.8 million (2022: €6.9 million) of originated credit-impaired assets which relate to new facilities granted to
counterparties in default as part of existing commitments.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
154
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.2 The expected credit loss provision and write-offs of exposures (continued)
39.2.2.2 Contributors to changes in provision (continued)
** Other movements comprise changes in impairment against accounts which have not been upgraded nor downgraded
*** Drawdown/(repayment) on existing assets is comprised of changes in carrying amount balance of accounts which have not been
upgraded nor downgraded
39.2.2.3 Impairment Allowances on Total/Forborne Exposures The Group The GroupOf which Of which TotalForborne TotalForborne2023 2023 2022 2022€000 €000 €000 €000Performing Stage 1 12,186 - 16,486 - Stage 2 17,872 3,926 13,495 5,053 30,058 3,926 29,981 5,053 Non-performing Stage 3 73,488 33,949 102,936 49,102 73,488 33,949 102,936 49,102 Total Impairment Allowances 103,546 37,875 132,917 54,155
The movement in allowance accounts for loans and advances to customers are as follows:
The GroupAllowances Allowances2023 2022€000 €000Change in allowances for uncollectibility:At 1 January132,917 163,785 Additions51,847 24,558 Reversals(81,218) (55,426)At 31 December 103,546 132,917
Interest income recognised during the year ended 31 December 2023 in respect of forborne assets amounted to €11.2 million (2022:
€12.5 million).
39.2.2.4 Write-off policy
Loans and debt securities are written off in full when there is no realistic prospect of recovery. This is generally the case when the
Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the
amounts. However, financial assets that are written off could be subject to enforcement activities in order to comply with the Group’s
procedures for recovery of amounts due.
39.2.2.5 Contractual amounts outstanding on assets that were written off
The contractual amount outstanding on financial assets that were written off during the year ended 31 December 2023 and that are
still subject to enforcement activity is €7.3 million (2022: €11.4 million).
39.2.3 Modification of financial assets’ terms
The contractual terms of a loan may be modified for a number of reasons, including changing market conditions, customer retention
and other factors not related to a current or potential credit deterioration of the customer. An existing loan whose terms have been
modified may be derecognised and the renegotiated loan recognised as a new loan at fair value in accordance with the accounting
policy set out in note 1.4.2.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
155
When the terms of a financial asset are modified and the modification does not result in derecognition, the determination of whether
the asset’s credit risk has increased significantly reflects comparison of:
- its remaining lifetime PD at the reporting date based on the modified terms; with
- the remaining lifetime PD estimated based on date at initial recognition and the original contractual terms.
For financial assets modified as part of the Group’s policy, the estimate of PD reflects whether the modification has improved or
restored the Group’s ability to collect interest and principal and the Group’s previous experience of similar forbearance action. As
part of this process, the Group evaluates the borrower’s payment performance against the modified contractual terms and considers
various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk and an expectation of forbearance may constitute
evidence that an exposure is credit-impaired (see Note 39.2.1.1). A customer needs to demonstrate consistently good payment
behaviour over a period of 12 months before the exposure is no longer in default or a period of 3 months before the exposure’s PD is
considered to have decreased such that the loss allowance reverts to being measured at an amount equal to 12-month ECL.
During the current financial year there were no significant modification of financial assets.
39.2.4 Equity instruments designated as at FVOCI
The fair value of equity instruments designated at FVOCI and the dividend income recognised is detailed below.
Dividend Dividend income income Fair value recognised Fair value recognised2023 2023 2022 2022€000 €000 €000 €000Local Other 8,097 378 16,096 287 Foreign Other 1,376 - - - Local Banks 40 7 91 3 Local Public 1,040 62 1,234 62 10,553 447 17,421 352
39. FINANCIAL RISK MANAGEMENT (continued)
39.2 Credit risk (continued)
39.2.3 Modification of financial assets’ terms (continued)
39.3 Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial
instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Group monitors and
manages this risk by maintaining sufficient cash and, where possible, financial assets for which there is a liquid market and that are
readily saleable to meet liquidity needs. The Group is exposed to daily calls on its available cash resources from overnight deposits,
current and call deposits, maturing term deposits, loan drawdowns, guarantees and from margin and other calls on cash-settled
derivatives.
In order to ensure that maturing funds are always available to meet expected demand for cash, the Board sets parameters within
which maturities of assets and liabilities may be mismatched. Unmatched positions potentially enhance profitability, but also increase
the risk of losses. In addition, the Group manages its risk to a shortage of funds by monitoring forecast and actual cashflows, by
monitoring the availability of raising funds to meet commitments associated with financial instruments and by holding financial assets
which are expected to generate cash inflows that will be available to meet cash outflows on liabilities.
The following table analyses Group financial liabilities into relevant maturity groupings, based on the remaining period at the reporting
date to the contractual maturity date. The balances in this table will not agree directly to the balances in the statement of financial
position as the table incorporates all cash flows, on an undiscounted basis, related to both principal as well as those associated with
all future coupon payments. Furthermore, loan commitments do not meet the criteria for recognition in the statement of financial
position.
Derivative liabilities held for risk management and derivatives designated for hedge accounting disclosed, represent amounts for
which net cash flows are exchanged.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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156
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
The GroupDue Due between 3 between 1 Gross Due withinand 12and 5 Due afterNominal Carrying3 months months years 5 years outflow amountAt 31 December 2023 €000 €000 €000 €000 €000 €000Derivative liabilities held for risk management 2,028 717 1,409 - 4,154 4,154 Amounts owed to banks 212,170 105,747 - - 317,917 315,651 Amounts owed to customers 11,984,087 111,727 52,041 5,585 12,153,440 12,152,216 Debt securities in issue - 35,000 455,000 - 490,000 350,099 Subordinated liabilities 1,953 3,828 23,123 175,027 203,931 163,237 Derivatives designated for hedge accounting - - 2,368 - 2,368 - Other financial liabilities 229,684 5,491 11,981 10,652 257,808 253,858 12,429,922 262,510 545,922 191,264 13,429,618 13,239,215 Loan commitments 2,271,758 Financial Guarantees 375,277 At 31 December 2022Derivative liabilities held for risk management 2,756 1,471 308 - 4,535 4,535 Amounts owed to banks 75,168 8 2,075 - 77,251 77,074 Amounts owed to customers 12,182,394 225,847 140,456 6,786 12,555,483 12,547,911 Debt securities in issue - 35,000 490,000 - 525,000 350,260 Subordinated liabilities 1,953 3,828 22,623 180,308 208,712 163,237 Derivatives designated for hedge accounting 41 - 2,884 - 2,925 2,167 Other financial liabilities 189,721 5,503 11,976 13,031 220,231 215,124 12,452,033 271,657 670,322 200,125 13,594,137 13,360,308 Loan commitments 1,887,449 Financial Guarantees 354,907
Assets available to meet these liabilities, and to cover outstanding commitments, include balances with Central Bank of Malta, treasury
bills and cash, cheques in course of collection, loans to banks and to customers and marketable securities and undrawn credit lines.
The following table analyses the assets and liabilities that are recognised in the statement of financial position into relevant maturity
groupings, based on the remaining period at the reporting date to their contractual maturity date.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
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157
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
The GroupBetween 3 Between 1 Less thanmonthsand More than CarryingAt 31 December 20233 monthsand 1 year5 years5 years OtherAmount€000 €000 €000 €000 €000 €000Assets Balances with Central Bank of Malta, treasury 2,277,670 - - - 75,647 2,353,317 bills and cashFinancial assets at fair value through profit or loss - Debt and other fixed income instruments - - - 42 - 42 - Equity and other non-fixed income instruments - - - - 40,584 40,584 - Loans and advances 475 - 27,727 37,103 - 65,305 - Derivative financial instruments 5,566 573 1,624 159 - 7,922 Investments - Debt and other fixed income financial instruments - FVOCI - - 62,533 13,418 - 75,951 - Amortised cost 130,980 538,329 2,909,487 1,688,162 - 5,266,958 - Equity and other non-fixed income instruments - FVOCI - - - - 10,553 10,553 Loans and advances to banks 196,307 - - - - 196,307 Loans and advances to customers 625,173 73,525 605,570 4,810,321 - 6,114,589 Investments in equity-accounted investees - - - - 110,098 110,098 Other assets - - - - 265,322 265,3223,236,171 612,427 3,606,941 6,549,205 502,204 14,506,948 Liabilities and EquityDerivative liabilities held for risk management 2,034 717 1,403 - - 4,154Amounts owed to banks 211,210 104,441 - - - 315,651Amounts owed to customers 11,983,974 111,218 51,789 5,235 - 12,152,216Other liabilities 229,579 5,185 10,589 8,505 - 253,858Debt securities in issue - 2,486 347,613 - - 350,099Subordinated liabilities 1,540 106 - 161,591 - 163,237Equity holders of the Bank - - - - 1,267,733 1,267,73312,428,337 224,153 411,394 175,331 1,267,733 14,506,948
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
158
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
The GroupBetween 3 Between 1 Less thanmonthsand More than Carrying3 monthsand 1 year5 years5 years OtherAmount€000 €000 €000 €000 €000 €000At 31 December 2022 restatedAssets Balances with Central Bank of Malta, treasury 3,300,537 2,964 - - 85,760 3,389,261 bills and cashFinancial assets at fair value through profit or loss - Debt and other fixed income instruments - 1,040 - 32 - 1,072 - Equity and other non-fixed income instruments - - - - 37,700 37,700 - Loans and advances 475 72 29,626 48,552 - 78,725 - Derivative financial instruments 1,167 18,138 5,238 4,323 - 28,866 Investments - Debt and other fixed income financial instruments - FVOCI - 3,099 - 79,111 - 82,210 - Amortised cost 121,214 923,890 2,045,296 1,377,033 - 4,467,433 - Equity and other non-fixed income instruments - FVOCI - - - - 17,421 17,421 Loans and advances to banks 394,546 - - - - 394,546 Loans and advances to customers 536,261 91,695 635,298 4,296,822 - 5,560,076 Investments in equity-accounted investees - - - - 100,206 100,206 Other assets - - - - 315,228 315,228 4,354,200 1,040,898 2,715,458 5,805,873 556,315 14,472,744 Liabilities and EquityDerivative liabilities held for risk management 2,756 1,471 308 - - 4,535 Amounts owed to banks 75,063 8 2,003 - - 77,074 Amounts owed to customers 12,181,880 224,491 135,085 6,455 - 12,547,911 Other liabilities - - - - 215,124 215,124 Derivatives designated for hedging accounting - - - 2,167 - 2,167 Debt securities in issue - 2,493 347,767 - - 350,260 Subordinated liabilities 1,540 107 - 161,590 - 163,237 Equity holders of the Bank - - - - 1,112,436 1,112,436 12,261,239 228,570 485,163 170,212 1,327,560 14,472,744
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
159
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
The BankBetween 3 Between 1 Less than 3 monthsand More than Carryingmonthsand 1 year5 years5 years OtherAmountAt 31 December 2023 €000 €000 €000 €000 €000 €000AssetsBalances with Central Bank of Malta, treasury 2,277,670 - - - 75,647 2,353,317 bills and cashFinancial assets at fair value through profit or loss - Debt and other fixed income instruments - - - 42 - 42 - Equity and other non-fixed income instruments - - - - 40,293 40,293 - Loans and advances 475 - 27,727 37,103 - 65,305 - Derivative financial instruments 5,565 573 1,624 160 - 7,922 Investments - Debt and other fixed income financial instruments - FVOCI - - 62,533 13,418 - 75,951 - Amortised cost 130,980 538,329 2,909,487 1,688,162 - 5,266,958 - Equity and other non-fixed income instruments - FVOCI - - - - 10,553 10,553 Loans and advances to banks 196,307 - - - - 196,307 Loans and advances to customers 625,173 73,525 605,570 4,810,321 - 6,114,589 Investments in equity-accounted investees and - - - - 79,100 79,100 subsidiariesOther assets - - - - 263,000 263,000 3,236,170 612,427 3,606,941 6,549,206 468,593 14,473,337 Liabilities and EquityDerivative liabilities held for risk management 2,034 717 1,403 - - 4,154 Amounts owed to banks 211,210 104,441 - - - 315,651 Amounts owed to customers 11,988,802 111,218 51,789 5,235 - 12,157,044 Other liabilities 229,885 5,035 10,589 8,505 - 254,014 Debt securities in issue - 2,486 347,613 - - 350,099 Subordinated liabilities 1,540 106 - 161,591 - 163,237 Equity holders of the Bank - - - - 1,229,138 1,229,138 12,433,471 224,003 411,394 175,331 1,229,138 14,473,337
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
160
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
The BankBetween 3 Between 1 Less thanmonthsand More than Carrying3 monthsand 1 year5 years5 years OtheramountAt 31 December 2022 €000 €000 €000 €000 €000 €000AssetsBalances with Central Bank of Malta, treasury 3,300,537 2,964 - - 85,760 3,389,261 bills and cashFinancial assets at fair value through profit or loss - Debt and other fixed income instruments - 1,040 - 32 - 1,072 - Equity and other non-fixed income instruments - - - - 37,548 37,548 - Loans and advances 475 72 29,626 48,552 - 78,725 - Derivative financial instruments 1,167 18,138 5,238 4,323 - 28,866 Investments - Debt and other fixed income financial instruments - FVOCI - 3,099 - 79,111 - 82,210 - Amortised cost 121,214 923,890 2,045,296 1,377,033 - 4,467,433 - Equity and other non-fixed income instruments - FVOCI - - - - 17,421 17,421 Loans and advances to banks 394,546 - - - - 394,546 Loans and advances to customers 536,261 91,695 635,298 4,296,822 - 5,560,076 Investments in equity-accounted investees and - - - - 79,100 79,100 subsidiariesOther assets - - - - 312,807 312,807 4,354,200 1,040,898 2,715,458 5,805,873 532,636 14,449,065 Liabilities and EquityDerivative liabilities held for risk management 2,756 1,471 308 - - 4,535 Amounts owed to banks 75,063 8 2,003 - - 77,074 Amounts owed to customers 12,188,553 224,491 135,085 6,455 - 12,554,584Other liabilities - - - - 214,706 214,706 Derivatives designated for hedge accounting - - - 2,167 - 2,167 Debt securities in issue - 2,493 347,767 - - 350,260 Subordinated liabilities 1,540 107 - 161,590 - 163,237 Equity holders of the Bank - - - - 1,082,502 1,082,50212,267,912 228,570 485,163 170,212 1,297,208 14,449,065
The ratio of net liquid assets to deposits from customers and short-term funding is used by the Group for managing liquidity risk.
For this purpose, ‘net liquid assets’ includes cash and cash equivalents and high quality liquid assets for which there is an active and
liquid market. ‘Deposits from customers and short-term funding’ includes deposits from banks, customers, debt securities issued,
other borrowings and commitments due within 30 days from reference date. Details of the reported Group ratio of net liquid assets
to deposits from customers at the reporting date and during the reporting period were as follows.
2023 2022At 31 December 40.65% 46.48%Average for the period 42.48% 45.88%Maximum for the period 45.52% 47.35%Minimum for the period 38.82% 40.00%
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
161
39. FINANCIAL RISK MANAGEMENT (continued)
39.3 Liquidity risk (continued)
Banking Rule 07 transposing the provisions of the EBA Guidelines on Disclosures of Encumbered and Unencumbered Assets (EBA/
GL/2014/03) requires disclosure on asset encumbrance. The Group is in compliance with the contents thereof.
This disclosure provides details of available and unrestricted assets that could be used to support potential future funding and
collateral needs. An asset is considered as encumbered when it has been pledged as collateral against an existing liability, and as a
result is no longer available to the Group to secure funding, satisfy collateral needs or be sold to reduce the funding requirement.
This disclosure is limited to assets available for central bank refinancing and securities that are transferable and is not designed to
identify assets which would be available to meet the claims of creditors or to predict assets that would be available to creditors in the
event of a resolution or bankruptcy.
Asset EncumbranceCarrying amount Fair value of Carrying amountFair value of of encumbered encumbered of unencumberedunencumberedassetsassetsassetsassets€000 €000 €000 €000The GroupAs at 31 December 2023Equity instruments - - 51,139 51,139 Debt securities 336,931 324,737 5,006,019 4,855,727 Loans and advances - - 8,653,870 - Other assets - - 458,989 - 336,931 324,737 14,170,017 4,906,866 The GroupAs at 31 December 2022 restatedEquity instruments - - 55,121 55,121 Debt securities 72,782 66,198 4,715,961 4,349,525 Loans and advances - - 9,098,819 - Other assets - - 530,061 - 72,782 66,198 14,399,962 4,404,646 The BankAs at 31 December 2023Equity instruments - - 50,847 50,847 Debt securities 336,931 324,737 5,006,019 4,855,727 Loans and advances - - 8,653,870 - Other assets - - 425,670 - 336,931 324,737 14,136,406 4,906,574 The BankAs at 31 December 2022Equity instruments - - 54,969 54,969 Debt securities 72,782 66,198 4,715,961 4,349,525 Loans and advances - - 9,098,819 - Other assets - - 506,534 - 72,782 66,198 14,376,283 4,404,494
The Group does not encumber any of the collateral received or any of its debt securities issued.
For the financial years ended 31 December 2023 and 31 December 2022, the Bank has an outstanding liability with regards to
significant claims associated with encumbered assets.
The Group and the Bank undertake the following:
i. Pledging of debt securities in favour of the Depositor Compensation Scheme.
ii. Pledging of debt securities which are covered by the TBMA/ISMA Global Repurchase Master Agreement.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
162
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. It arises in all areas of the Group’s
activities and is managed by a variety of different techniques as detailed below.
The objective of the Group is to manage and control market risk exposures in order to optimise return on risk while maintaining a
market profile consistent with the Bank’s status as a leading Bank in providing financial products and services.
The market risk appetite is articulated in the Treasury Management Policy. It is defined as the quantum and composition of market risk
that the Bank is currently exposed to and the direction in which the Bank desires to manage this risk. Market risk is managed through
limits set in the Treasury Management Policy. The Policy is reviewed by Treasury department in co-ordination with Risk Management
department and is approved by the Asset and Liability Management Committee (ALCO) and the Board of Directors.
39.4.1 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument would fluctuate because of changes in
market interest rates.
The Group is exposed to fair value interest rate risk arising from financial assets and liabilities with fixed interest rates and to cash flow
interest rate risk arising from financial assets and liabilities with floating interest rates. The Group is not directly exposed to interest
rate risk on investment in equity instruments. The Group uses interest rate swaps to hedge the interest rate risk of certain financial
instruments.
The analysis of interest rate risk has evolved from assessing the sensitivity of the treasury portfolio, using a modified duration method,
to a more comprehensive methodology. The latter approach covers all interest sensitive assets and liabilities, as well as off-balance
sheet items; this effectively widens the analysis and enables the stressing of various movements in the yield curve. The tables below
depict the movement of stressed yield curves and the changes in the Report Equity and Net Interest Income to such movement. For
further information related to the measurement of interest rate risk can be found in the Pillar 3 Disclosures Report as included in the
Bank’s website.
Bps DirectionParallel Shock Up 200 UpParallel Shock Down 200 DownShort Rates Up 250 UpShort Rates Down 250 DownSteepener 250 Short Rates Down100 Long Rates UpFlattener 250 Short Rates Up100 Long Rates Down
The below table applies both the Group and the Bank.
Parallel Short Parallel Shock Short Rates Shock Up Down Rates Up Down Steepener Flattener € millions € millions € millions € millions € millions € millionsSensitivity of reported equity to interest rate movements2023At 31 December 131 (137) 70 (73) (10) 34 Average for the year 214 (232) 98 (103) 1 37 Most favourable for the year 263 (137) 114 (73) 8 38 Least favourable for the year 131 (289) 70 (120) (10) 34 2022At 31 December 85 (87) 48 (50) (11) 26 Average for the year 78 (62) 50 (50) (20) 37 Most favourable for the year 85 (8) 67 (26) (11) 48 Least favourable for the year 68 (87) 28 (65) (32) 26
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
163
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk (continued)
39.4.1 Interest rate risk (continued)
Parallel Parallel Shock Shock UpDown€ millions € millionsSensitivity of projected net interest income to interest rate movements2023At 31 December 58 (59)Average for the year 78 (79)Most favourable for the year 96 (59)Least favourable for the year 58 (97)2022At 31 December (8) (127)Average for the year 4 (94)Most favourable for the year 11 (67)Least favourable for the year (8) (127)
Interest rate repricing gap
The table below summarises the Group’s exposure to interest rate risk. Included in the table are Group assets and liabilities, including
derivative financial instruments which are principally used to reduce exposure to interest rate risk, categorised by repricing date.
The Group’s assets and liabilities are set to reprice as follows:
3 months 1 year oror less but less but Up tooveroverOver1 Month1 month3 months1 year Others Total€000 €000 €000 €000 €000 €000AssetsBalances with Central Bank of Malta, treasury 2,353,317 - - - - 2,353,317 bills and cashFinancial assets at fair value through profit or loss - Debt and other fixed income instruments - 19 2 21 - 42 - Equity and other non-fixed income instruments - - - - 40,584 40,584 - Loans and advances 65,305 - - - - 65,305 - Derivative financial instruments 20 - 14 - 7,888 7,922 Investments - Debt and other fixed income financial instruments - FVOCI - - - 75,951 - 75,951 - Amortised cost 123,588 75,752 606,864 4,460,754 - 5,266,958 - Equity and other non-fixed income instruments - FVOCI - - - - 10,553 10,553 Loans and advances to banks 59,132 9,026 - - 128,149 196,307 Loans and advances to customers 4,804,195 644,930 221,667 443,797 - 6,114,589 Investments in equity-accounted investees - - - - 110,098 110,098 Other assets - - - - 265,322 265,322 Total 2023 7,405,557 729,727 828,547 4,980,523 562,594 14,506,948 Total 2022 restated7,430,917 1,251,809 1,291,193 3,525,690 973,135 14,472,744
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
164
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk (continued)
39.4.1 Interest rate risk (continued)
3 months 1 year oror less but less but Up tooveroverOver1 Month1 month3 months1 year Others Total€000 €000 €000 €000 €000 €000Liabilities and EquityFinancial liabilities at fair value through profit 1,399 635 717 1,403 - 4,154 or lossAmounts owed to banks 34,794 151,376 104,433 - 25,048 315,651 Amounts owed to customers 11,971,391 24,268 103,296 33,114 20,147 12,152,216 Other liabilities - - - - 253,858 253,858 Debt securities in issue - - - 350,099 - 350,099 Subordinated liabilities - - - 163,237 - 163,237 Equity holders of the Bank - - - - 1,267,733 1,267,733 Total 2023 12,007,584 176,279 208,446 547,853 1,566,786 14,506,948 Total 2022 restated 12,153,217 100,540 217,056 633,919 1,368,012 14,472,744 Interest rate swaps - 2023 (12,715) (27,099) (78,605) 118,419 - Interest rate swaps - 2022 (17,780) (32,468) (82,733) 132,981 - Gap - 2023 (4,614,742) 526,349 541,496 4,551,089 - Gap - 2022 (4,740,080) 1,118,801 991,404 3,024,752 - Cumulative Gap - 2023 (4,614,742) (4,088,393) (3,546,897) 1,004,192 - Cumulative Gap - 2022 (4,740,080) (3,621,279) (2,629,875) 394,877 -
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
165
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk (continued)
39.4.2 Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The Board of Directors sets limits on the level of exposure by currency and in total, which levels are monitored daily.
The following table summarises the Group’s exposure to foreign currency exchange rate risk at the reporting date. Included in the
table are the Group’s assets and liabilities at carrying amounts, analysed into relevant currency groupings.
Total
OtherThe Group EUR USD GBP AUD Currencies31 December 2023 €000 €000 €000 €000 €000 €000AssetsBalances with Central Bank of Maltatreasury bills and cash 2,348,610 2,097 1,173 721 716 2,353,317 Financial assets at fair value through profit or loss- Debt and other fixed income instruments income 42 - - - - 42 instruments- Equity and other non-fixed income instruments 18,098 22,486 - - - 40,584 - Loans and advances 65,305 - - - - 65,305 - Derivative financial instruments 7,922 - - - - 7,922 Investments - Debt and other fixed income financial instruments - FVOCI 13,418 62,533 - - - 75,951 - Amortised Cost 4,994,855 152,120 99,701 20,282 - 5,266,958 - Equity and other non-fixed income instruments - measured at FVOCI 10,553 - - - - 10,553 Loans and advances to banks 21,876 31,759 24,108 2,548 116,016 196,307 Loans and advances to customers 6,053,087 60,285 1,217 - - 6,114,589 Other assets 375,949 (740) 190 - 21 375,420 13,909,715 330,540 126,389 23,551 116,753 14,506,948 Liabilities and EquityDerivative liabilities held for risk management 4,154 - - - - 4,154 Amounts owed to banks 283,782 30,082 715 26 1,046 315,651 Amounts owed to customers 11,646,851 201,393 148,779 35,426 119,767 12,152,216 Other liabilities 233,525 2,265 (2,405) 344 (37) 233,692 Provision 20,166 - - - - 20,166 Debt securities in issue 350,099 - - - - 350,099 Subordinated liabilities 163,237 - - - - 163,237 Equity 1,250,159 17,560 14 - - 1,267,733 13,951,973 251,300 147,103 35,796 120,776 14,506,948 Net on balance sheet financial position 79,240 (20,714) (12,245) (4,023)Notional amount of derivative instruments (97,964) 24,541 12,087 395 Net open position (18,724) 3,827 (158) (3,628)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
166
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk (continued)
39.4.2 Currency risk (continued)
Other The Group EUR USD GBP AUDCurrencies Total31 December 2022 restated €000 €000 €000 €000 €000 €000AssetsBalances with Central Bank of Maltatreasury bills and cash 3,386,511 1,575 489 209 477 3,389,261 Financial assets at fair value through profit or loss- Debt and other fixed income instruments 1,072 - - - - 1,072 - Equity and other non-fixed income instruments 19,053 18,647 - - - 37,700 - Loans and advances 78,725 - - - - 78,725 - Derivative financial instruments 28,865 1 - - - 28,866 Investments - FVOCI 15,926 66,284 - - - 82,210 - Amortised cost 3,795,198 367,992 266,162 38,081 - 4,467,433 - Equity and other non-fixed income instruments - measured at FVOCI 17,421 - - - - 17,421 Loans and advances to banks 30,461 114,986 47,352 3,665 198,082 394,546 Loans and advances to customers 5,514,781 29,127 16,168 - - 5,560,076 Other assets 416,176 (751) (1) - 10 415,434 13,304,189 597,861 330,170 41,955 198,569 14,472,744 Liabilities and EquityDerivative liabilities held for risk management 4,535 (87) 64 23 - 4,535 Amounts owed to banks 61,921 9,519 4,662 3 969 77,074 Amounts owed to customers 11,830,982 294,126 184,321 40,160 198,322 12,547,911 Other liabilities 194,619 3,812 576 222 (623) 198,606 Provision 16,518 - - - - 16,518 Derivatives designated for hedge accounting - 2,167 - - - 2,167 Debt securities in issue 350,260 - - - - 350,260 Subordinated liabilities 163,237 - - - - 163,237 Equity 1,112,422 - 14 - - 1,112,436 13,734,494 309,537 189,637 40,408 198,668 14,472,744 Net on balance sheet financial position 288,324 140,533 1,547 (99)Notional amount of derivative instruments (302,336) (143,026) (700) (540)Net open position (14,012) (2,493) 847 (639)
Currency risk, commonly referred to as exchange-rate risk, arises from the change in price of one currency in relation to another where
a possibility of losing money due to unfavourable moves in exchange rates can arise. The following table shows how a 1% change in
the exchange rate of the Group’s main three foreign currencies would impact the institution. The sensitivity analysis performed shows
that the impact on the balance sheet is minimal. No other currency other than the domestic currency, exceeded the 5% aggregate
amount of liabilities, thus only the euro-denominated currency is considered significant. In fact, 95.9% of total liabilities are euro-
denominated and in principle, BOV does not finance its assets in a currency different from that in which the assets are denominated.
Currency Risk Sensitivity Analysis impact on Net Open position2023 USD GBP AUDTotal€000 €000 €000 €000+1% change in foreign exchange 185 (38) 2 149 -1% change in foreign exchange (189) 39 (2) (152)2022 USD GBP AUDTotal€000 €000 €000 €000+1% change in foreign exchange 1,280 949 476 2,705 -1% change in foreign exchange (1,306) (968) (486) (2,760)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
167
39. FINANCIAL RISK MANAGEMENT (continued)
39.4 Market risk (continued)
39.4.3 Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the
individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Group is exposed to equity price risks arising from the holding of equity instruments classified either as FVOCI or at fair value
through profit or loss.
The carrying amounts of financial instruments at the reporting date which could potentially subject the Group to equity price risk are
disclosed in the notes to the financial statements.
This risk is monitored and managed by the Risk management function of the Bank, as disclosed in more detail above.
39.5 Transferred financial assets that are not derecognised in their entirety
The Group and the Bank2023 2022€000 €000Debt securities classified as amortised cost 296,700 30,883 Amounts owed to banks 281,687 30,883
These transactions are covered by the TBMA/ISMA Global Repurchase Master Agreement (“the Agreement”) and involve the sale of
financial assets with a simultaneous agreement to repurchase them at a pre-determined price at a future date. The securities sold
comprise investment securities. The counterparty’s liability is included in amounts owed to banks. The Group and the Bank continue
to recognise the transferred assets since all the risks and rewards of the assets will be substantially retained in a manner that does not
result in the transferred assets being derecognised for accounting purposes.
Each party to a transaction is subject to the events of default listed in the Agreement. In the event that any of the events of default
is/are triggered, transactions are immediately terminated. Consequently, performance of the respective obligations of the parties with
respect to the delivery of securities, the payment of the repurchase prices for any equivalent securities and the repayment of any cash
margin shall become due and payable.
39.6 Fair value of financial instruments
The Group’s accounting policy for determining the fair value of financial instruments is described in note 1.19 and 1.25 to these
Financial Statements.
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs
to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly. This category includes instruments valued using: quoted market prices in active markets for similar
instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation
techniques in which all significant inputs are directly or indirectly observable from market data.
- Level 3 inputs are unobservable inputs for the asset or liability. This category includes all instruments for which the valuation
technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instruments’
valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant
unobservable adjustments or assumptions are required to reflect differences between the instruments.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group and the Bank
determine when transfers are deemed to have occurred between Levels in the hierarchy at the end of each reporting period.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
168
39. FINANCIAL RISK MANAGEMENT (continued)
39.6 Fair value of financial instruments (continued)
39.6.1 Bases of valuing financial assets and liabilities measured at fair value
Fair value measurementLevel 1 Level 2 Level 3 Total€000 €000 €000 €000The GroupAt 31 December 2023AssetsFinancial assets at fair value through profit or loss - debt and other fixed income instruments 15 19 8 42 - equity and other non-fixed income instruments 705 33,818 6,061 40,584 - loans and advances - 65,305 - 65,305 - derivative financial instruments - 7,922 - 7,922 InvestmentsDebt and other fixed income instruments - FVOCI - 13,418 62,533 75,951 Equity and other non-fixed income instruments - FVOCI 1,813 8,740 - 10,553 2,533 129,222 68,602 200,357 LiabilitiesFinancial liabilities at fair value through profit or loss - 4,154 - 4,154 - 4,154 - 4,154
Fair value measurementLevel 1 Level 2 Level 3 Total€000 €000 €000 €000The GroupAt 31 December 2022AssetsFinancial assets at fair value through profit or loss - debt and other fixed income instruments 1,055 17 - 1,072 - equity and other non-fixed income instruments 554 30,327 6,819 37,700 - loans and advances - 78,725 - 78,725 - derivative financial instruments - 28,866 - 28,866 InvestmentsDebt and other fixed income instruments - FVOCI 15,926 - 66,284 82,210 Equity and other non-fixed income instruments - FVOCI 9,503 7,918 - 17,421 27,038 145,853 73,103 245,994 LiabilitiesFinancial liabilities at fair value through profit or loss - 4,535 - 4,535 Derivatives designated for hedge accounting - 2,167 - 2,167 - 6,702 - 6,702
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
169
39. FINANCIAL RISK MANAGEMENT (continued)
39.6 Fair value of financial instruments (continued)
39.6.1 Bases of valuing financial assets and liabilities measured at fair value (continued)
During the current year, due to the changes in market conditions for certain assets at fair value through other comprehensive income,
quoted prices in active markets were no longer available for these securities. However, there was sufficient information available to
measure the fair value of these financial assets based on observable market inputs. Therefore, these financial assets, with a carrying
amount of €20.2 million were transferred from Level 1 to Level 2 of the fair value hierarchy. During the same period, no material
change in fair value hierarchy was made in financial assets classified at fair value through profit or loss.
39.6.2 Control Framework
Fair values are subject to a control framework designed to ensure that they are either determined or validated by a function independent
of the risk taker and that they are appropriately performed and reviewed by competent personnel. To this end, the determination of
fair values is a process which is performed by Financial Markets and Investments and reviewed by Finance. Finance establishes the
accounting policies and, in conjunction with Financial Markets and Investments, it establishes the procedures governing valuation, and
is responsible for ensuring that they comply with all relevant accounting standards. The valuation techniques and procedures applied
are subject to a process of due diligence, which process was duly approved by the Board and the Audit Committee and documented
accordingly.
For all financial instruments where fair values are determined by reference to externally quoted prices or observable pricing inputs to
valuation techniques, independent price determination or validation is utilised, to the extent practicable. In inactive markets, direct
observation of a traded price may not be possible. In these circumstances, the Bank sources alternative market information to validate
the financial instrument’s fair value, with greater weight given to information that is considered to be more relevant and reliable. The
factors which are mainly considered are the following:
- the extent to which prices may be expected to represent genuine traded or tradable prices;
- the degree of similarity between financial instruments;
- the degree of consistency between different sources;
- the process followed by the pricing provider to derive the data;
- the elapsed time between the date to which the market data relates and the end of the reporting period; and
- the manner in which the data was sourced.
In determining the fair values for financial instruments measured at fair value the credit risk adjustment for the counterparty, the Bank
or both, as the case may be, is deemed to be immaterial and hence no adjustment to the fair value of financial instruments at fair value
through profit or loss was effected.
The Group calculates the credit risk adjustment by applying the probability of default of the counterparty to the expected positive
exposure to the counterparty and multiplying the result by the loss expected in the event of default. The calculation is performed
over the life of the potential exposure.
Financial instruments at fair value through profit or loss and financial assets which are held for investment purposes as FVOCI are
carried at their fair value.
The Treasury Bills captioned with Balances with Central Bank of Malta and cash are held as FVOCI.
Financial instruments not measured at fair value:
(i) Investments - Debt and other fixed income instruments held to collect
This category of asset is carried at amortised cost. Their fair value is disclosed separately in Note 39.6.3.
(ii) Loans and advances to customers
Loans and advances to customers are the largest financial asset held by the Group and are reported net of allowances to reflect the
estimated recoverable amounts. The carrying amount of loans and advances to customers is a reasonable approximation of fair value
because these are re-priced to consider changes in both benchmark rate and credit spreads. Their fair value measurement is a Level
2 input.
(iii) Loans and advances to banks, balances with Central Bank
The majority of these assets reprice or mature in less than 1 year. Hence their fair value is not deemed to differ materially from their
carrying amount at the respective reporting dates.
(iv) Amounts owed to banks and customers
These liabilities are carried at amortised cost. The majority of these liabilities reprice or mature in less than 1 year. Hence their fair
value is not deemed to differ materially from their carrying amount at the respective reporting dates. Their fair value measurement is
a Level 2 input.
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
170
39. FINANCIAL RISK MANAGEMENT (continued)
39.6 Fair value of financial instruments (continued)
39.6.2 Control Framework (continued)
(v) Senior non-preferred liabilities
These liabilities are carried at amortised cost. Their fair value is disclosed separately in Note 39.6.3.
(vi) Subordinated liabilities
These liabilities are carried at amortised cost. Their fair value is disclosed separately in Note 39.6.3.
(vii) Other financial liabilities
The fair value of other financial liabilities is not deemed to differ materially from their carrying amount at the respective reporting
dates.
39.6.3 Bases of valuing financial assets and liabilities not measured at fair value
The following table provides an analysis of financial instruments that are not measured at fair value subsequent to initial recognition:
Fair value measurementCarrying Level 1 Level 2 Level 3 TotalAmount€000 €000 €000 €000 €000At 31 December 2023Financial assetsInvestments Debt and other fixed income instruments-Amortised 3,028,291 2,076,181 - 5,104,472 5,266,958 Financial liabilitiesDebt securities in issue 379,750 - - 379,750 350,099 Subordinated liabilities 146,656 - - 146,656 163,237 526,406 - - 526,406 513,336
Fair value measurementCarrying Level 1 Level 2 Level 3 TotalAmount€000 €000 €000 €000 €000At 31 December 2022Financial assetsInvestments Debt and other fixed income instruments-Amortised 3,912,356 182,066 - 4,094,422 4,467,433 Financial liabilitiesDebt securities in issue 358,120 - - 358,120 350,260 Subordinated liabilities 139,181 - - 139,181 163,237 497,301 - - 497,301 513,497
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
171
39. FINANCIAL RISK MANAGEMENT (continued)
39.6 Fair value of financial instruments (continued)
39.6.3 Bases of valuing financial assets and liabilities not measured at fair value (continued)
The reconciliation of Level 3 fair value measurements of financial instruments is disclosed below:
2023 2022FVTPL FVOCI FVTPL FVOCIEquity and other Equity and other non-fixed income Debt and other fixed non-fixed income Debt and other fixed instrumentsincome instrumentsinstrumentsincome instruments€000 €000 €000 €000Opening balance 6,819 66,284 9,889 73,488 Total gains or losses- in profit or loss (560) - (3,133) - - in other comprehensive income - (3,751) - (7,204)Purchases - - 63 - Sales (198) - - - Closing balance 6,061 62,533 6,819 66,284
The instruments classified within Level 3 comprise:
- an externally managed fund: the Bank has determined that the reported net asset value of the fund represents its fair value at the
end of the reporting period;
- shares in a global payments technology company; the shares held in the technology company are valued using the intrinsic value
of the conversion shares less a discount for liquidity and litigation risk; and
- debt placed with the institutional investors: the Bank values its holding in the bond on the basis of MGS yields to maturity on the
premises that the bond is guaranteed by the Government of Malta. A haircut is also included in the pricing of the bond to factor
in differences between the bond and the MGSs used as a comparable in relation to the price of other risks, including illiquidity
premium, guarantee enforcement risk, currency risk and make whole call prepayment risk,
39.6.4
Unobservable inputs used in measuring fair value
The following table sets out information about significant unobservable inputs used at 31 December 2023 and 2022 in measuring
financial instruments categorised as Level 3 in the fair value hierarchy.
Fair value as at Fair value measurement Type of financial 31 December Valuation Significant sensitivity instruments2023techniqueunobservable inputto unobservable input€000Reported share Significant increase inFVTPL Equity2,651Based on of net assets NAV would result in a higher fair (unlisted fund)(2022: 3,981) reported NAVrepresenting the fair value.value at year-endPrice-based Discount for 3,41050% Significant increase in discountFVTPL Equityadjusted with a liquidity and (2022: 2,838) (2022: 50%) would result in a lower fair value.discountlitigation riskPrice-based Haircut 62,5336% Significant increase in haircut would FVOCI Debtadjusted with a representative of (2022: 66,284)(2022: 6%)result in a lower fair value.haircutthe related risks
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
172
39. FINANCIAL RISK MANAGEMENT (continued)
39.7 Capital risk management
The Group’s capital management approach ensures a sufficient level of capitalisation to manage the risk exposures whilst supporting
business growth and providing adequate returns to the shareholders. Risk capital management does not in any way substitute risk
mitigation measures. It is vital that the structure of limits and thresholds, as stipulated in the Bank’s Risk Appetite Framework, should
be able to prevent concentrations of risk from building up in such a way as to compromise a significant proportion of the Group’s
capital resources.
On 1 January 2014, the Capital Requirements Directive (CRD IV) and the Capital Requirements Regulations (CRR) came into effect,
constituting the European implementation of the Basel capital and liquidity agreement of 2010. The Group has made the necessary
changes in order to ensure that it is compliant with the Pillar I capital requirements set by the CRR and its subsequent revisions.
Meanwhile, the Bank is undergoing preparations to be in a position to implement the new capital requirement regulations as enshrined
in the Capital Requirements Regulation 3, due to come into force in 2025. Other material risks are also allocated capital as part of the
Internal Capital Adequacy Process (ICAAP) embedded in the Pillar II process. This process helps to measure with greater risk sensitivity
the amount of regulatory capital which the Group requires to cover risks assumed in the course of its business, including risks not
covered in Pillar I. The Board submitted the latest ICAAP capital document to the JST in March 2023.
Capital management is under the direct control of the Asset and Liability Committee (ALCO). During the financial period, ALCO has
monitored the adequacy of the Group’s capital and gave strategic direction on the most efficient use of capital.
During the period under review and during the comparative period, there were no reported breaches in respect of the externally
imposed capital requirements. The Group uses the Standardised Approach for credit risk, the Basic Indicator Approach for operational
risk and the Standardised Approach with respect to the Group’s foreign exchange risk in line with CRR requirements.
The following table shows the components and basis of calculation of the Group’s and the Bank’s own funds.
The Group The BankAt 31 December 2023 €000 €000Own fundsTier 1-Paid up capital instruments 583,849 583,849 -Share premium 49,277 49,277 -Retained earnings* 507,795 506,551 -Accumulated other comprehensive income 4,069 3,957 -Other reserves 55,560 55,560 -Funds for general banking risk 3,378 3,378 -Deductions: Prudential Valuation fair valued assets and liabilities (326) (295) Other intangible assets (37,862) (37,862) Depositor Compensation Scheme (26,523) (26,523) Regulatory coverage on non-performing exposures (11,088) (11,088)Total Tier 1 Capital 1,128,129 1,126,804 *Retained earnings include current period’s profit which is subject to regulatory approval.Tier 2-Capital instruments and subordinated loans 163,237 163,237 Total Tier 2 Capital 163,237 163,237 Total Own Funds 1,291,366 1,290,041
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
173
The Group The BankAt 31 December 2022 restated €000 €000Own fundsTier 1-Paid up capital instruments 583,849 583,849-Share premium 49,277 49,277-Retained earnings* 391,236 388,690-Accumulated other comprehensive income 5,162 5,050-Other reserves 52,050 52,050-Funds for general banking risk 3,586 3,586-Deductions: Prudential Valuation fair valued assets and liabilities (631) (565) Other intangible assets (41,843) (41,843) Depositor Compensation Scheme (24,780) (24,780) Deferred Tax Assets related to unutilised tax losses (22,967) (22,967) Regulatory coverage on non-performing exposures (7,139) (7,139)Total Tier 1 Capital 987,800 985,208 *Retained earnings include current period's profit which is subject to regulatory approval.Tier 2-Capital instruments and subordinated loans 163,237 163,237 Total Tier 2 Capital 163,237 163,237 Total Own Funds 1,151,037 1,148,445
Further information on the Group’s capital adequacy ratios may be found in the Pillar 3 Disclosures Report – section 4.2, table CC1.
The report will be available on the Bank’s website.
39.8 Offsetting financial assets and financial liabilities
The disclosures set out in the following table include financial assets and financial liabilities that:
- are offset in the Group’s statement of financial position; or
- are subject to an enforceable master netting arrangement that covers similar financial instruments irrespective of whether they
are offset in the statement of financial position.
The derivative financial assets with a positive carrying amount and the derivative financial liabilities with a negative carrying amount
are set-off to the extent that there are liabilities and if not, they are presented separately in the Statement of Financial Position.
These instruments are subject to the ISDA Master Agreement. The ISDA Master Agreement provides, amongst others, for the netting
of termination values for purposes of determining a single lump-sum termination amount upon the insolvency of a counterparty. By
virtue of the Set-off and Netting on Insolvency Act, 2003 (Chapter 459, Laws of Malta), the close-out netting provisions contained in
the ISDA Master Agreement are valid and enforceable under Maltese law. The cleared interest rate swaps assets and liabilities which
include related financial collateral, are offset on the Statement of Financial Position given the right of set-off both in the normal course
of business and in the event of default, insolvency, and bankruptcy. The remaining derivatives do not meet the criteria for offsetting
in the Statement of Financial Position given the set-off provisions under the ISDA Master Agreement enforceable only where there is
an event of default, credit event upon merger or any termination event has been declared.
The Bank also has in place credit support annexes “CSAs” with a number of its financial counterparties for purposes of the
collateralisation of exposures between the Bank and its counterparties. The CSA is a schedule to the ISDA Master Agreement. By
virtue of such CSAs, a party to a derivative that has an exposure to its counterpart, will post collateral to its counterpart to cover such
exposure by way of an outright title transfer of such collateral. All CSAs that the Bank has in place are of a two-way nature.
In the case of non-financial counterparties, the Bank enters into pledging collateral arrangements with the counterparties, in favour
of the Bank. Such pledging agreements are of a one-way nature, in favour of the Bank.
39. FINANCIAL RISK MANAGEMENT (continued)
39.7 Capital risk management (continued)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
174
The Group2023 2022€000 €000Derivative financial assetsGross amounts of recognised financial assets 10,795 28,866 Gross amounts of recognised financial liabilities set off in the statement of financial position (2,873) - Net amounts of financial assets presented in the statement of financial position 7,922 28,866 Related amounts not set off in the statement of financial position: Financial instruments (2,387) (2,212) Financial collateral received (4,306) (25,684)Net amount 1,229 970
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
Derivative financial liabilities
Gross amounts of recognised financial liabilities 5,893 6,702 Gross amounts of recognised financial assets set off in the statement of financial position (1,739) - Net amounts of financial liabilities presented in the statement of financial position 4,154 6,702 Related amounts not set off in the statement of financial position: Financial instruments (2,387) (2,212) Financial collateral pledged (1,391) (2,015)Net amount 376 2,475
A number of financial assets and financial liabilities are being offset and it is the intention to settle net, since they relate to the same
counterparties and have the same maturities.
39.9 Interest Rate Benchmark Reform
i) Overview
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank
offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group does not have significant exposure
to IBORs on its financial instruments which are subject to this market-wide initiative. Most reforms affecting the Group had been
completed by the end of 2021.
The IBOR reform did not have significant operational, risk management and accounting impacts across all of its business lines.
Financial risk is predominantly limited to interest rate risk.
As at 31 December 2023, the IBOR reform in respect of currencies to which the Group has exposure has been completed.
ii) Non-derivative financial assets
All loans and advances to customers indexed to IBOR were transitioned on 3 January 2022.
During 2023, the Group had the following principal IBOR and ARR (alternative Reference Rate) exposures in respect of non-derivative
financial assets:
• Floating rate loans and advances to customers: EURIBOR, SONIA, SOFR and CDOR (2022: EURIBOR, SONIA and CDOR)
• Floating rate indexed assets and investment securities indexed to EURIBOR, ESTR, GBP LIBOR, SONIA, USD LIBOR, and USD
SOFR held throughout its operations (2022: EURIBOR, GBP LIBOR, SONIA and USD LIBOR).
No floating rate securities required transitioning to new benchmarks.
39. FINANCIAL RISK MANAGEMENT (continued)
39.8 Offsetting financial assets and financial liabilities (continued)
Notes to the financial statements
for the year ended 31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
175
iii) Non -derivative financial liabilities
The Bank does not have any financial liabilities linked to interbank offer rates (IBOR) as at 31 December 2023 and 31 December 2022.
iv) Derivatives and hedge accounting
The derivatives held by the Group in US Dollar (refer to note 39.4.2) are held for risk management purposes and have floating legs
are now indexed to USD SOFR.
The Group’s interest rate derivatives held for hedging amount to $65 million in notional value (market value: €1.78 million) as of 31
December 2023. The floating legs of the interest rate swaps are indexed to the new benchmark 6-month USD Secured Overnight
Financing Rate (SOFR) since LIBOR was phased out on 30 June 2023. No major impact to the hedge effectiveness of existing
transactions.
40. ASSETS HELD FOR REALISATION
The assets held for realisation mainly comprise immovable properties that were held as collateral for outstanding loans, which
properties were taken into the possession of the Bank following defaults by the counterparty. The Bank’s policy is to dispose of such
assets within a reasonable timeframe from the date of classification, unless events or circumstances which are beyond the Bank’s
control extend the period to complete the sale.
41. TRUST ACTIVITIES
The Group acts as trustee and provides trust activities that result in the holding and placing of assets on behalf of third parties. Trust
assets are not assets of the Group and therefore they are not included in its Statement of Financial Position.
Income derived from trust assets is excluded from revenue. Fees arising from the rendering of trustee services are recognised in the
Group’s profit or loss.
At 31 December 2023, the total assets held by the Group on behalf of its customers amounted to €8.9 million (2022: €14.7 million).
Details on significant claims related to trusts in prior year are given in note 33.
42. REGULATORY COMPENSATION SCHEMES
As at 31 December 2023 and 2022, no balances with Central Bank of Malta have been pledged in favour of the Depositor
Compensation Scheme (refer to note 16).
In accordance with the provisions of the Investor Compensation Scheme Regulations, 2003, issued under the Investment Services
Act, 1994, licence holders are required to transfer a variable contribution to an Investor Compensation Scheme Reserve and place the
equivalent amount with a bank, pledged in favour of the Scheme. Alternatively, licence holders can elect to pay the amount of variable
contribution directly to the Scheme.
Bank of Valletta p.l.c. has elected to pay the amount of the variable contribution directly to the Scheme.
Regulatory contributions amounting to €7.4 million (2022: €12.1 million), included with administrative expenses, reflect the Group’s
annual obligations arising from the recent EU Directives on Deposit Guarantee Scheme and Single Resolution Fund.
43. EVENTS SUBSEQUENT TO THE FINANCIAL REPORTING DATE
There are no events subsequent to the financial reporting date to report.
44. REGISTERED OFFICE
The registered and principal office of the Bank is 58, Triq San Zakkarija, Il-Belt Valletta, VLT1130, Malta.
39. FINANCIAL RISK MANAGEMENT (continued)
39.9 Interest Rate Benchmark Reform (continued)
Bank of Valletta p.l.c.
Annual Report 2023
176
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report
To the Shareholders of Bank of Valletta p.l.c.
1 Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Bank of Valletta p.l.c. (the “Bank” or the “Company”) and of the
Group of which the Company is the parent, which comprise the statements of financial position as at 31
December 2023, the statements of profit or loss and other comprehensive income, changes in equity and
cash flows for the year then ended, and notes, comprising material accounting policies and other explanatory
information.
In our opinion, the accompanying financial statements:
(a) give a true and fair view of the financial position of the Bank and of the Group as at 31 December 2023,
and of their financial performance and their cash flows for the year then ended in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the EU; and
(b) have been properly prepared in accordance with the provisions of the Companies Act, 1995 (Chapter
386, Laws of Malta) (the “Act”) and the Banking Act, 1994 (Chapter 371, Laws of Malta) (the “Banking
Act”) and, additionally, specifically in relation to those of the Group, with the requirements of Article 4
of Regulation (EC) 1606/2002 on the application of international accounting standards (the
“Regulation”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We are independent of the Bank and the Group in accordance with the
International Ethics Standards Board for Accountants’ International Code of Ethics for Professional
Accountants (including International Independence Standards) (“IESBA Code”), together with the ethical
requirements that are relevant to our audit of the financial statements in accordance with the Accountancy
Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the Accountancy Profession Act
(Chapter 281, Laws of Malta), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Bank of Valletta p.l.c.
Annual Report 2023
177
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current year (as communicated to the audit committee), and include
a description of the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
We summarise below the key audit matter, together with our response by way of the audit procedures we
performed to address that matter in our audit, and key observations arising with respect to such risks of
material misstatement.
Measurement of impairment allowances on loans and advances to customers at amortised cost,
including off-balance sheet elements of those exposures and related disclosures.
Accounting policy notes 1.4.3 to the financial statements and notes 8, 17, 33, 34 and 39.2 for further
disclosures.
Expected credit loss allowance on 'Loans and advances to customers at amortised cost' (Bank and Group:
€6.1 billion) amounted to €103.5 million. Expected credit loss provision on 'Financial guarantees contracts
and loan commitments' (Bank and Group: €2.7 billion) amounted to €17.8 million.
The calculation of the expected credit loss ('ECL') involves significant judgement and estimates. Of all the
Group's financial instruments, the most significant impact in terms of complexities around the measurement
of the ECL and of the materiality of the resultant allowances was in relation to the loans and advances to
customers' portfolio (and the related off-balance sheet elements namely financial guarantees contract and
loan commitments). In that regard, our key areas of audit risk in the Group's calculation of the ECL were the
following:
Bank of Valletta p.l.c.
Annual Report 2023
178
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Key audit matters (continued)
• Model estimations - Inherently judgmental modelling is used to estimate ECL which involves determining
Probabilities of Default ("PD"), Loss Given Default ("LGD") and Exposures at Default ("EAD"). In
particular, the PD models are the key drivers of the Group's ECL calculation and are therefore the most
significant judgmental element of the Group's ECL modelling approach.
• Economic Scenarios - Significant management judgement is applied in determining the selection of (i)
forward looking macroeconomic scenarios, (ii) the associated scenario probabilities and (iii) the material
economic variables which drive the scenarios and the related weightings.
• Qualitative adjustments to the model-driven ECL raised by the Group to address known impairment
model limitations or emerging trends as well as risks not captured by the model. These adjustments are
inherently uncertain and significant management judgement is involved in the estimation process.
• Identification of a significant increase in credit risk ('SICR') is also a key area of judgement within the
Group's ECL calculation as the application of the SICR criteria determines whether a twelve month or
lifetime provision is recorded.
• Individually assessed stage 3 exposures may be materially misstated if individual impairments are not
appropriately identified and estimated. The calculation of expected credit losses on stage 3 exposures
includes a range of estimates of future cash flows and valuation of collateral, which are inherently
uncertain and judgmental. Management judgement is also involved in post-model adjustments on stage
3 exposures.
The disclosures regarding the application of IFRS 9 are important in the context of explaining the key
judgements made, as referred to in this key audit matter, and inputs used to generate the IFRS 9 ECL results.
Bank of Valletta p.l.c.
Annual Report 2023
179
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Key audit matters (continued)
Our response
As part of our procedures:
• We tested the design and implementation as well as the operating effectiveness of relevant manual and
automated controls (that is, Information Technology based). More specifically, the following controls
were tested:
— the Group's review and approval of loan credit ratings;
— the Group's review control over the completeness and accuracy of loan exposures' inputs, data and
assumptions keyed into the ECL model;
— the Group's review control over model validation and monitoring;
— management's review control over ECL movements, calculation and authorization of post model
adjustments and management overlays; and
— testing the design and operating effectiveness of the key controls over past due days calculations
and automated credit rating calculation.
• We involved our own financial risk modelling specialists in evaluating the appropriateness of the Group's
IFRS 9 impairment methodologies (including the SICR criteria used) as disclosed in Note 39.2.1.2,
39.2.1.2.5 and 39.2.1.2.6. We inspected model code for the calculation of certain components of the
ECL model to assess its consistency with the Group's approved methodology. We used our experience
of the Group to assess the PD and LGD models and related assumptions. On a sample basis, we
assessed the reasonableness of the model predictions by comparing them against actual results. We
made enquiries of the Group as to the reasons for any significant variations identified and assessed the
reasonableness of the explanations provided, against the specialists' expectations on the direction and
extent of variations identified.
• We involved our own economics specialist to assist in assessing:
— the appropriateness of the methodology for determining the macroeconomic scenarios used and the
reasonableness of the probability weightings applied to them;
— the appropriateness of the stage determination criteria based on the ECL methodology;
Bank of Valletta p.l.c.
Annual Report 2023
180
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Key audit matters (continued)
— the reasonableness of the key macroeconomic variables (as set out in note 39.2.1.2.5 to the financial
statements) as well as the accuracy of macroeconomic data feeding the ECL model.
• ln evaluating the Group's credit grading process, we assessed the Internal Credit Risk System model.
We have also performed credit reviews on a selection of corporate exposures selected qualitatively
based on risk, including a sample of stage 3 loans and advances to customers. In performing those
credit reviews, we:
— considered relevant internal information available used in the Group's assessment and any relevant
external data in relation to those exposures;
— evaluated whether those exposures were graded in line with the Group's credit policy; and
— determined whether a SICR was appropriately identified.
In addition, for the selected stage 3 corporate exposures, we independently re-performed the
impairment calculation to assess the reasonableness of the Bank's related ECL.
• On a sample of loans and advances to customers, we:
— performed testing over key data elements (EAD, PD and LGD) impacting the ECL calculations to
assess the accuracy of information used; and
— re-performed model calculations for accuracy for all stages.
• We assessed the post model adjustments, in order to assess the reasonableness of the adjustments by
challenging key assumptions, inspecting the calculation methodology and tracing a sample of the data
used back to source data.
• We assessed whether the disclosures in relation to IFRS 9 adequately explain the key judgements made
and significant inputs used in the recognition of expected credit losses as at the end of the financial
reporting period.
We have no key observations to report, specific to this matter.
Bank of Valletta p.l.c.
Annual Report 2023
181
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Other information
The directors are responsible for the other information. The other information comprises the;
— Contents and General Information;
— Chairman's Statement;
— CEO's Commentary;
— Board of Directors and Group Company Secretary;
— Executive Committee and Group Chief Internal Auditor;
— Corporate Social Responsibility;
— Directors' Report;
— Corporate Governance Statement of Compliance;
— Remuneration Report;
— ESG Risk Management and Disclosures;
— The Group's five year summary; and
— Group's Financial Highlights in US dollars.
but does not include the financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and, other than in the case of
the directors’ report on which we report separately below in our ‘Opinion on the Directors’ Report’, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information,
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Bank of Valletta p.l.c.
Annual Report 2023
182
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that (a) give a true and fair view in
accordance with IFRS as adopted by the EU, and (b) are properly prepared in accordance with the provisions
of the Act and the Banking Act, and, additionally, specifically in relation to those of the Group, with the
requirements of Article 4 of the Regulation. The directors are also responsible for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s and the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the Company
and/or the Group or to cease operations, or have no realistic alternative but to do so.
The directors are also responsible for overseeing the financial reporting process.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes
our opinion. ‘Reasonable assurance’ is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional
scepticism throughout the audit.
Bank of Valletta p.l.c.
Annual Report 2023
183
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Auditors’ responsibilities for the audit of the financial statements (continued)
We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Consider the extent of compliance with those laws and regulations that directly affect the financial
statements, as part of our procedures on the related financial statement items. For the remaining laws
and regulations, we make enquiries of directors and other management, and inspect correspondence
with the regulatory authority, as well as legal correspondence. As with fraud, there remains a higher risk
of non-detection of other irregularities (whether or not these relate to an area of law directly related to the
financial statements), as these may likewise involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s and the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company's and the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors’ report. However, future events or conditions may cause the Company and/or the
Group to cease to continue as a going concern.
Bank of Valletta p.l.c.
Annual Report 2023
184
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Auditors’ responsibilities for the audit of the financial statements (continued)
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the audit committee regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical
requirements regarding independence and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the audit committee, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors' report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Bank of Valletta p.l.c.
Annual Report 2023
185
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
2 Opinion on the Directors’ Report
The directors are responsible for preparing a directors’ report in accordance with the provisions of article 177
of the Act and other applicable legal requirements, and is to include a statement that the Company is a going
concern with supporting assumptions or qualifications as necessary, as required by Rule 5.62 of the Capital
Markets Rules issued by the Malta Financial Services Authority (the “Capital Market Rules”).
We are required to consider whether the information given in the directors' report for the accounting period
for which the financial statements are prepared is consistent with those financial statements; and, if we are
of the opinion that it is not, we shall state that fact in our report. We have nothing to report in this regard.
Pursuant to article 179(3) of the Act, other than for the non-financial information that is exclusively required
to be disclosed by paragraph 8 of the Sixth Schedule of the Act with respect to the Bank, and paragraph 11
of the Sixth Schedule of the Act with respect to the Group (and on which we report separately below in our
'Report on Other Legal and Regulatory Requirements'), we are also required to:
• express an opinion on whether the directors’ report has been prepared in accordance with the applicable
legal requirements; and
• state whether, in the light of the knowledge and understanding of the entity and its environment obtained
in the course of our audit of the financial statements, we have identified material misstatements in the
directors’ report, giving an indication of the nature of any such misstatements.
Pursuant to Capital Markets Rule 5.62 of the Capital Market rules, we are required to review the directors'
statement in relation to going concern.
In such regards:
• in our opinion, the Directors’ Report has been prepared in accordance with the applicable legal
requirements;
•
we have not identified material misstatements in the Directors’ Report; and
• we have nothing to report in relation to the statement on going concern.
Bank of Valletta p.l.c.
Annual Report 2023
186
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
3 Report on Other Legal and Regulatory Requirements
Matters on which we are required to report by the Act, specific to public-interest entities
Pursuant to article 179B(1) of the Act, we report as under matters not already reported upon in our ‘Report
on the Audit of the Financial Statements’:
• we were first appointed as auditors by the shareholders on 19 June 2015, and subsequently reappointed
at the Company's general meetings for each financial period thereafter. The period of total uninterrupted
engagement is nine years;
• our opinion on our audit of the financial statements is consistent with the additional report to the audit
committee required to be issued by the Audit Regulation (as referred to in the Act); and
• we have not provided any of the prohibited services as set out in the APA.
Matters on which we are required to report by the Act, specific to large undertakings which are
public-interest entities and public-interest entities which are parent undertakings of a large group
that (individually and on a consolidated basis, respectively) exceed the criterion of an average
number of five hundred employees during the financial year
Pursuant to article 179(3) of the Act, we report as under matters not already reported upon in our 'Opinion
on the Directors' Report:
The Directors' Report contains the information required by paragraph 8 of the Sixth Schedule, with respect
to the Bank and paragraph 11 of the Sixth Schedule with respect to the Group.
Bank of Valletta p.l.c.
Annual Report 2023
187
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Matters on which we are required to report by the Banking Act and exception by the Act
Pursuant to article 31(3)(a), (b) and (c) of the Banking Act, in our opinion:
• we have obtained all the information and explanations which, to the best of our knowledge and belief,
were necessary for the purpose of our audit;
• proper books of account have been kept by the Bank so far as appears from our examination thereof;
and
• the Bank's financial statements are in agreement with the books of account.
Furthermore, we have nothing to report in respect of the above matters, where the Act requires us to report
to you by exception pursuant to articles 179(10) and 179(11).
Pursuant to article 31(3)(d) of the Banking Act, in our opinion and to the best of our knowledge and belief
and, on the basis of the explanations given to us, the financial statements give the information required by
law in force in the manner so required.
Report on compliance of the Annual Report with the requirements of the Commission Delegated
Regulation (EU) 2018/815 supplementing Directive 2004/109/EC (the “European Single Electronic
Format Regulatory Technical Standard” or “ESEF Regulation”), by reference to Capital Markets
Rule 5.55.6 issued by the Malta Financial Services Authority
We have undertaken a reasonable assurance engagement in accordance with the requirements of Directive
6 issued by the Accountancy Board in terms of the Accountancy Profession Act, 1979 (Chapter 281, Laws
of Malta), the Accountancy Profession (European Single Electronic Format) Assurance Directive, on the
Group's Annual Report for the year ended 31 December 2023, prepared in a single electronic reporting
format.
Bank of Valletta p.l.c.
Annual Report 2023
188
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Responsibilities of the directors for compliance with the requirements of the ESEF Regulation
As required by Capital Markets Rule 5.56A, the directors are responsible for the preparation of the Annual
Report in XHTML format, including the relevant mark-ups, in accordance with the requirements of the ESEF
Regulation.
In addition, the directors are responsible for such internal control as they determine is necessary to enable
the preparation of the Annual Report that is in compliance with the requirements of the ESEF Regulation.
Auditors' responsibilities to report on compliance with the requirements of the ESEF Regulation
Our responsibility is to obtain reasonable assurance about whether the Annual Report in XHTML format,
including the relevant mark-ups, comply in all material respects with the ESEF Regulation based on the
evidence we have obtained. As part of our work, we obtain an understanding of the Company’s controls
relevant to the preparation of the Annual Report in compliance with the said requirements, but not for the
purpose of expressing an opinion on the effectiveness of the controls in place.
In discharging that responsibility, we:
• obtain an understanding of the entity's financial reporting process, including the preparation of the Annual
Report, in accordance with the requirements of the ESEF Regulation;
• perform validations to determine whether the Annual Report has been prepared in accordance with the
requirements of the technical specifications of the ESEF Regulation; and
• examine the information in the Annual Report to determine whether all the required mark-ups therein
have been applied and whether, in all material respects, they are in accordance with the requirements
of the ESEF Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our
conclusion.
Bank of Valletta p.l.c.
Annual Report 2023
189
KPMG
92, Marina Street
Pietà, PTA 9044
Malta
Telephone (+356) 2563 1000
Fax (+356) 2566 1000
Website www.kpmg.com.mt
KPMG, a Maltese civil partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee.
The firm is registered as a partnership of Certified Public
Accountants in terms of the Accountancy Profession Act.
A list of partners and directors of
the firm is available at 92,
Marina Street, Pietà, PTA9044,
Malta.
Independent Auditors’ Report (continued)
To the Shareholders of Bank of Valletta p.l.c.
Conclusion
In our opinion, the Annual Report for the year ended 31 December 2023 has been prepared, in all material
respects, in accordance with the requirements of the ESEF Regulation, by reference to Capital Markets Rule
5.55.6.
The Principal authorised to sign on behalf of KPMG on the audit resulting in this independent auditors’ report
is Claude Ellul.
KPMG 27 March 2024
Registered Auditors,
92
Marina Street,
Pietà PTA 9044,
Malta
The Group’s five-year summary
extracted from the respective audited financial statements
Bank of Valletta p.l.c.
Annual Report 2023
190
A. STATEMENTS OF PROFIT OR LOSS
For the financials years
2023 2022 2021 2020 2019
12 months to
December 2023
12 months to
December 2022
restated
12 months to
December 2021
12 months to
December 2020
12 months to
December 2019
€000 €000 €000 €000 €000
Interest and similar income 401,402 220,210 194,813 190,282 206,963
Interest expense (49,403) (18,311) (38,503) (43,476) (54,113)
Net interest income 351,999 201,899 156,310 146,806 152,850
Other operating income 89,003 91,458 86,598 84,809 96,436
Other operating charges (210,900) (192,616) (195,603) (170,382) (162,540)
Net impairment reversal/(charge) 10,481 49,075 18,856 (65,136) 11,562
Net litigation settlement (charge)/reversal - (102,958) - 8,584 (25,000)
Share of results of equity-accounted investees,
net of tax 11,030 2,217 14,498 10,520 15,897
Profit before tax 251,613 49,075 80,659 15,201 89,205
Income tax expense (83,677) (17,547) (24,468) (1,399) (25,713)
Profit for the year 167,936 31,528 56,191 13,802 63,492
Attributable to:
Equity holders of the Bank 167,936 31,528 56,191 13,802 63,492
167,936 31,528 56,191 13,802 63,492
Earnings per share 28.8c 5.4c 9.6c 2.4c 10.9c
Only 2022 amounts have been restated in line with the the adoption of IFRS 17 and IFRS 9 by the associates as detailed in Note 1.1.4.3.
The Group’s five-year summary
extracted from the respective audited financial statements (continued)
Bank of Valletta p.l.c.
Annual Report 2023
191
B. STATEMENTS OF FINANCIAL POSITION
2023 2022 2021 2020 2019
restated
€000 €000 €000 €000 €000
ASSETS
Balances with Central Bank of Malta, treasury
bills and cash
2,353,317 3,389,261 4,626,066 3,798,449 3,669,580
Financial assets at fair value through profit or
loss and Investments
5,467,315 4,713,427 3,707,655 3,447,912 3,276,299
Loans and advances to banks 196,307 394,546 452,469 479,409 501,686
Loans and advances to customers at amortised
cost
6,114,589 5,560,076 5,097,598 4,741,443 4,445,812
Investments in equity-accounted investees 110,098 100,206 145,501 111,999 101,479
Property and equipment and intangible assets 188,814 188,738 186,696 188,312 186,659
Current tax - 20,706 28,640 26,759 15,185
Deferred tax 34,025 67,898 84,563 91,259 76,017
Assets held for realisation 11,979 12,138 11,740 9,958 10,123
Other assets 12,746 7,227 5,423 5,251 42,627
Prepayments 17,758 18,521 12,091 10,020 5,142
Total Assets 14,506,948 14,472,744 14,358,442 12,910,771 12,330,609
LIABILITIES
Derivative liabilities held for risk management
and designated for hedge accounting 4,154 6,702 17,642 28,406 24,870
Amounts owed to banks 315,651 77,074 560,117 88,031 66,047
Amounts owed to customers 12,152,216 12,547,911 12,176,854 11,272,289 10,629,719
Current tax 28,079 - - - -
Deferred tax 7,435 7,054 6,717 6,186 5,736
Other liabilities 198,178 191,552 203,141 161,617 189,593
Provisions 20,166 16,518 104,449 113,880 118,109
Debt securities in issue 350,099 350,260 - - -
Subordinated liabilities 163,237 163,237 163,237 163,237 234,230
Total Liabilities 13,239,215 13,360,308 13,232,157 11,833,646 11,268,304
EQUITY
Called up share capital 583,849 583,849 583,849 583,849 583,849
Share premium account 49,277 49,277 49,277 49,277 49,277
Revaluation reserve 59,628 57,212 58,438 55,477 54,898
Retained earnings 574,979 422,098 434,721 388,522 374,281
Total Equity 1,267,733 1,112,436 1,126,285 1,077,125 1,062,305
Total Liabilities and Equity 14,506,948 14,472,744 14,358,442 12,910,771 12,330,609
MEMORANDUM ITEMS
Contingent liabilities 394,414 374,109 351,362 285,775 341,618
Commitments 2,315,962 1,918,119 1,898,310 1,811,954 1,828,756
The Group’s five-year summary
extracted from the respective audited financial statements
Bank of Valletta p.l.c.
Annual Report 2023
192
C. STATEMENTS OF CASH FLOW
2023 2022 2021 2020 2019
restated
€000 €000 €000 €000 €000
Net cash (used in)/from operating activities (562,111) (561,373) 1,157,101 295,040 90,157
Cash flows from investing activities
Dividends received 3,878 2,387 2,443 219 24,186
Interest received from investing securities 50,073 30,940 36,575 40,332 50,840
Injection of capital in associate (note 18) - - (20,000) - -
Proceeds from sale of equity instruments - - - 562 -
Net (outflow)/inflow on investment securities (781,815) (1,024,416) (289,103) (259,471) 263,225
Purchase of property and equipment (17,583) (16,567) (11,849) (15,724) (34,996)
Proceeds on disposal of property and
equipment
- - - - 330
Proceeds from sale of equity instruments 7,897 - - - -
Net cash (used in)/from investing activities (737,550) (1,007,656) (281,934) (234,082) 303,585
Cash flows from financing activities
Interest paid on debt securities and
subordinated liabilities
(5,781) (5,781) (5,776) (6,457) (10,050)
Proceeds from issue of senior non-preferred
notes
- 350,000 - - -
Outflows from issue of senior non-preferred
notes
(35,830) (2,274) - - -
Repayment of debt securities - - - (70,993) (40,208)
Payment of lease liabilities (1,763) (1,739) (1,919) (1,704) (1,475)
Dividends paid (17,533) (10,019) - - -
Net cash from/(used in) financing activities (60,907) 330,187 (7,695) (79,154) (51,733)
(Decrease)/increase in cash and cash
equivalents (1,360,568) (1,238,842) 867,472 (18,196) 342,009
D. PERFORMANCE EXPRESSED IN RELATION TO AVERAGE TOTAL ASSETS AND AVERAGE CAPITAL EMPLOYED
2023 2022 2021 2020 2019
restated
% % % % %
Operating income to total assets 3.0 2.0 1.8 1.8 2.0
Operating expenses to total assets 1.5 1.3 1.4 1.4 1.3
Profit before tax to total assets 1.7 0.3 0.6 0.1 0.7
Profit before tax to capital employed 21.1 4.4 7.3 1.4 8.7
Profit attributable to equity holders to total
assets
1.2 0.2 0.4 0.1 0.5
Profit attributable to equity holders to capital
employed
14.1 2.8 5.1 1.3 6.2
Group Financial Highlights in US dollars
31 December 2023
Bank of Valletta p.l.c.
Annual Report 2023
193
The following figures were converted from Euro to US Dollars using the rate of exchange ruling on 31 December 2023. The rate used
was €1 = US$ 1.1077. This does not reflect the effect of the change in the rate of exchange since 31 December 2022 which was €1
= US$ 1.0677.
2023 2022
restated
US$000 US$000
Net income attributable to equity holders of the Bank 186,023 33,662
Net income per share 32.0c 6.0c
Gross dividend paid 29,879 16,457
Net dividend paid 19,421 10,697
Gross dividend per share 5.1c 2.8c
Total assets 16,069,346 15,452,549
Liquid funds 2,606,769 3,618,714
Investments and financial assets at fair value through profit or loss 6,056,145 5,032,526
Advances 6,990,579 6,357,750
Investments in equity-accounted investees 121,956 106,990
Share capital 646,730 623,376
Capital reserves 120,634 113,698
Retained earnings 636,904 450,674
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