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3 NEWS 3.12.2020 FROM PAGE 1 e AGM – held remotely last urs- day because of the COVID-19 pan- demic - approved a 'Remuneration Policy for Directors' authorising the Board of Directors to issue up to 15 million shares for the purpose of a Var- iable Remuneration Share Plan, equiv- alent to 2.5% of the Bank's current is- sued share capital. Under this plan, BOV's directors, top executives and other bank employees would be able to receive shares as re- muneration. An ad-hoc committee will be set up by the Board to select eligible executives to participate in the plan for a performance period. Cordina said that any share award would vest over a number of years and the plan includes standard industry 'malus' and clawback provisions. Malus refers to the reduction or forfeiture of any award prior to its vesting or of any annual incentive outcome prior to its determination or prior to the making of a related incentive payment, for any amounts to be determined by the Board's committee. 'Clawback' refers to the reduction of some of an execu- tive's compensation and an executive's obligation to repay specified amounts to a Group company. Some shareholders have complained that the decision to set up the plan at this time is very inconsiderate of the bank, when it has not paid them inter- im or final dividends for the past two years. Also, they pointed out that the bank is still facing a possible substantial fall- out in the €363 million litigation case brought against BOV by bondholders of the now defunct Deiulemar shipping company. Litigation e controllers of the Torre d'An- nunziata shipping company, whose fraudulent bankruptcy left thousands of investors with nothing, have already rejected a €50 million out-of-court set- tlement put forward by BOV earlier this year. BOV CEO Rick Hunkin told Busi- nessToday that the bank did not want to drag the case through the various levels of court litigation, as it wanted to be clear of this "shadow that has been hanging over the bank for a number of years". In 2018, BOV appealed an Italian court's order for a precautionary war- rant that requested it to hive off €363 million, as a provision for damages requested by liquidators of the Deiule- mar group and representatives of the company's 13,000 Italian bondholders. e court has yet to issue a sentence and the case can be expected to go on into appeal and to the final Cassation Court decision. But the bank remains intent on set- tling the case out of court, even though it insists it had no blame and played no part in the decision-making that led the investors to lose their money. As expected, Hunkin would not say how high BOV was willing to go to set- tle the case out of court. But he admit- ted that the bank had put aside €100 million to settle three litigation cases it had pending when Hunkin took over the CEO role last year. e other two litigation cases – one involving the La Vallette Multi Manag- er Property Fund and the other involv- ing the Swedish Pension Agency – have since been settled out of court for €4.6 million and €26.5 million respectively. Effectively, that leaves BOV around €70 million to settle the Deiulemar out of court, although there is noth- ing holding the bank from going even higher than that in order to ensure clo- sure. Additionally, more funds will be re- leased and available after the bank reached an agreement with insurers to pay a part – as yet unspecified – of the SPA settlement. Correspondence banking Hunkin said BOV was also pursuing intensive dialogue with banks in the United States after Raiffeisen Bank an- nounced it would no longer offer BOV corresponding services after March 2021. is would leave BOV customers with no sure and swift way of affecting payments in US dollars. "Having a corresponding bank in the US is key for our customers trading in US dollars," Hunkin said. "And we are currently in negotiations with Raiffei- sen and other institutions to try and secure corresponding services beyond March 2021. He said potential banks were nervous in dealing with Malta with the Money- val being a major issue. "Having Malta fail in nine out of 11 of Moneyal's focus area, is of major concern to potential correspondence banks," Hunkin said. "And with some foreign banks already nervous with Malta's focus on gaming, marijuana and bitcoin, Moneyval adds a further complication that the BOV needs to overcome if we are to secure a US cor- responding bank." He said that the bank was, in the meantime, preparing for a worst-case scenario and was meeting those cus- tomers that needed US dollar corre- sponding services and discussing a possible scenario where such services were no longer available. "One solution would be for customers to start issuing payments in Euros, and we are currently encouraging affected customers to investigate how feasible such a switch would be for them." BOV-2023 Addressing the shareholders at last week's AGM, Cordina said BOV has embarked on an ambitious programme that will transform the way it does its business to future-proof it for decades to come. "is will not be a superficial exer- cise, but a radical change from the inside out affecting all operations and interactions with internal and external stakeholders ensuring that the Bank continues to be relevant to the Maltese economy, while delivering better re- turns to its shareholders," he said. e new strategy, dubbed BOV-2023 aims to lift BOV to a place among the best of its peers in Europe and will ul- timately target the maximisation of shareholder value in the medium term, with a vision to restore the payment of dividends at levels that are adequate, stable and predictable. e three main pillars of this strategy will focus on investment in the digitisa- tion of products and services, to make it easier for customers to transact with the bank; the rebalancing of BOV's bal- ance sheet – whereby customers will be guided to identify alternative invest- ment products that give them better returns than their deposit accounts – and improving customer experience by reforming long and complex processes and updating systems to increase effi- ciency and customer support. BOV making plans for having no US correspondent bank after March BOV chairman Dr Gordin Cordina (right) addressing the virtual AGM, as CEO Rick Hunkin looks on "Banks have been directly instructed to preserve all capital until such time when the final effects of the pandemic are known. We understand this is not welcome news for shareholders, but we hope you understand this is an unprecedented situation we are all facing" Rick Hunkin CEO, Bank of Valletta

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