Bank of Valletta has announced that it has been advised by Raiffeisen Bank International that it is seeking to terminate its US$ correspondence relationship with effect from 31st March 2021.

BOV, in a press statement issued on Friday morning, said it is in discussions with Raiffeisen “regarding the ongoing correspondent banking relationship supporting US$ payments with a view to satisfying any concerns and restoring the position.”

BOV said it is also actively considering alternative routes to diversify the available channels for the payment of US$.

Last year, Dutch Bank ING had announced it would be terminating its correspondent banking relationship supporting US dollar payments and that it would stay on until March of this year.

Deutsche Bank, which had been under significant pressure over the reported processing of illicit money, had also severed relationships with local institutions in 2019.

Malta had increasingly been viewed as a high-risk jurisdiction, while the severing of correspondent banking relationships makes it more difficult to facilitate transactions between jurisdictions, especially in dollars.

Correspondent banks facilitate wire transfers and other business transactions, typically for smaller domestic banks.

While BOV has been undergoing aggressive de-risking exercises, as well as a complete upgrade of its core systems, its CEO had back in January commented that restoring Malta’s dented reputation could only take place once all players, including banks, make a concerted effort to show the country is low-risk.

He had also said that BOV established a relationship with Western Union to put in place a new dollar payment arrangement.

A World Bank assessment last year found that correspondent banking relationship are continually being severed as major banks around the world seek to mitigate risk.