http://www.cib.db.com/docs_new/15_01_The_Banker_Masterclass_Steinmueller_Sehr(1).pdf

Does this mean that Deutsche Bank rates business with Bank of Valletta as not having the highest levels of controls, that is, a risky one? The article was published on 5th January 2015. Why did Deutsche Bank decide to terminate the relationship with Bank of Valletta only now?

I have 100% agreement with you. Good luck and God bless Malta.

Well, Malta-LICENSED banks, I suppose, as distinct from Maltese-owned banks.

Ezatt.

Thank you for the breakdown.

So, if I understood correctly, if anyone needs to pay for anything in USD, this payment has to be effected through a third party who actually has USD.

Now, with this new situation, I will have to go through ‘a friend of a friend’. So, thus far, the first negative effect has been increased cost and turnaround times.

Eventually I can end up in a situation where none of my friends will want to speak to their friends ‘on my behalf’ and I won’t be able to buy anything in dollars.

Is that the gist of it?

Will Konrad Mizzi operate from the Office of the Prime Minister again? Is Brian Tonna still there?

What other Maltese banks? HSBC is not a Maltese bank, Banif is not a Maltese bank, etc. The Bank of Valletta is the only Maltese bank as far as I know.

Bravissima. You turned it into simple words, maybe now those corned beef bought voters will understand.

You’re living in Malta. You run a business. Your business buys goods or services from a company or person in another country, and has to pay him/her/it in US dollars.

You contact your bank – the Bank of Valletta – and instruct it to pay John Smith or Broad Beans Ltd the sum of USD10,000. You give the required details, including the name of Smith’s or Broad Beans Ltd’s bank, bank account number, banking codes and so on.

Because this is a US dollar payment, regardless of where John Smith’s/Broad Beans Ltd’s bank account is – it could be in China, for instance – the Bank of Valletta has to route the payment through a United States bank with which it has a relationship for this specific purpose. This is called a correspondent bank.

So the Bank of Valletta contacts its correspondent bank in the United States, saying it has a client here in Malta who wants to pay Broad Beans Ltd in China the sum of USD10,000. After the standard anti-money-laundering routine questions, the US bank routes the payment of USD10,000 to Broad Beans Ltd’s bank account in China on behalf of Bankof Valletta in Malta.

For this service, it charges the Bank of Valletta a fee. The Bank of Valletta then bills you for this fee, which is called a ‘processing charge’.

At the other end, Broad Beans Ltd will also be charged a fee by its own bank in China.

Over the past 18 months or so, the Bank of Valletta has systematically lost all its US correspondent banks, which have ended their relationships with the Maltese bank, mainly because of heightened anti-money-laundering restrictions. The Bank of Valletta was left with just one: Bankers Trust in the US, which is wholly-owned and controlled by Deutsche Bank.

This week, that correspondent banking relationship ended too. This means that the Bank of Valletta no longer has a US correspondent bank through which to process its many USD transactions on behalf of clients. A bank that cannot process USD transactions might as well close shop.

So how is the Bank of Valletta now surviving? It has entered into ‘two-tier’ correspondent banking relationships with European banks, and through these agreements it can gain access to the US correspondent banks of those European banks.

This means that another step has been added to the payment process, making it longer and more expensive.

Now, instead of contacting its US correspondent bank when its client, Reuben Scicluna, wants to pay Broad Beans Ltd in China the sum of $10,000, the Bank of Valletta contacts the Bank of Pasta in Rome, the Bank of Pasta in Rome then contacts its correspondent bank in the United States, and the US bank contacts the bank in China.

You will see that this takes longer, is more complicated, and fees are charged for all these extra steps which are then passed on to you, the client. Also, now it is not only the US bank asking a whole battery of anti-money-laundering checking questions, but also the Bank of Pasta.