In the latest of a series of hammer blows to the Latvian banking industry the European Central Bank (ECB) has declared that Latvia’s ABLV Bank is on the verge of collapse and must be closed down.
The news of ABLV Bank’s demise amid accusations that it has served as a “major money laundering institution” comes just a week after the head of the country’s central bank was arrested on separate charges of bribery.
The ECB said in a statement on Saturday that ABLV, which is Latvia’s third-largest bank by assets, is “failing or likely to fail,” as is its Luxembourg-based subsidiary, ABLV Bank Luxembourg.
“Due to the significant deterioration of its liquidity, the bank is likely unable to pay its debts or other liabilities as they fall due,” the Frankfurt-based ECB said.
“The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit guarantee fund starts,” it added.
It said Europe’s Single Resolution Board decided that action by the central bank to shore up ABLV, “was not in the public interest,” so it will be dissolved under Latvian law.
ABLV, for its part, has assured that it took the necessary measures to improve its liquidity last week, notably by adding some “1.36 billion euros in four working days” to its coffers in order to reassure the ECB.
“It was quite enough for the bank to resume payments and honor all its commitments to its customers, but due to political considerations, we were not allowed,” the banking group said in a statement quoted by the BNS agency.
The financial situation of ABLV Bank suddenly deteriorated at the end of last week after the decision by the US Treasury Department on February 13 to designate the Latvian bank as a “major money-laundering institution”, involved “large-scale illicit activity connected to Azerbaijan, Russia, and Ukraine.
The bank also stands accused of facilitating funding for illegal weapons development programs in North Korea.
The difficulties for ABLV come at a time when a political and financial scandal is brewing at the country’s central bank. Ilmars Rimsevics, the governor of the central bank has been suspended from his office on suspicion of corruption. Rimsevics was arrested by agents of Latvia’s National Anti-Corruption Bureau on February 17 and questioned for several hours in relation to allegations that he accepted a bribe of “no less than 100,000 euros”.
Mr Rimsevics, who also sits on the board of the ECB, protests his innocence and has accused other Latvian banks of orchestrating a campaign against him.
Since the US Treasury Department opened its investigation into ABLV, the bank has had its access to the financial system cut, which in the short term threatened its survival despite a comfortable financial situation. At the end of 2017, ABLV had nearly 1.7 billion euros in cash, for a balance sheet total of 3.6 billion euros.
The bank was formally pronounced as bankrupt in Brussels by the Single Resolution Mechanism, an institution set up in January 2016 and responsible for organising the orderly bankruptcy of troubled banks in the euro area.