FRANKFURT—A major Latvian bank facing U.S. sanctions for allegedly helping North Korea will be wound up under Local laws after the European Central Bank declared it “failing or likely to fail.”
In a statement early Saturday, the ECB said ABLV Bank’s liquidity had deteriorated significantly, making it unlikely to pay its debts.
Following the ECB’s decision, which also included the bank’s subsidiary in Luxembourg, Europe’s banking resolution authority decided the banks didn’t represent a systemic risk for their countries or the region and should be wound up by Local authorities rather than be “bailed in” under EU rules.
ABLV, Latvia’s third biggest bank, was a lead player in an industry that has been a boom for the former Soviet state: helping shell companies in and around Russia bring their money into the European Union. Earlier this month, the U.S. Treasury declared the bank’s practices a form of money laundering.
On Saturday, ABLV said it would be liquidated. In four days, the bank claimed, it had raised enough capital to meet all its depositors’ demands and keep functioning. “Due to political considerations the bank was not given a chance to do it,” it said in a statement.
Under bail-in rules, shareholders, creditors and depositors of more than €100,000 ($123,000) would be in line for losses before taxpayers were called to help the bank.
The resolution authority “concurred with the ECB’s assessment and concluded that there are no available supervisory or private sector measures which could prevent the failure of the banks,” it said in a separate statement.
Deposits of as much as €100,000 are protected under Latvian and Luxembourg laws.
On Friday, Latvia’s chief banking regulator tried to assure the country’s depositors that ABLV posed no risk to the system and was on track to receive as much as €480 million in emergency aid from the national central bank.
The ECB’s move suggests it didn’t receive the aid.
ABLV’s quick fall follows a move by the U.S. Treasury last week to block its access to U.S. dollars, accusing it of “institutionalized money laundering.” It said most of the bank’s customers were shell companies registered outside Latvia. ABLV said it isn’t guilty of money laundering and has invested heavily in compliance systems.
European regulators have repeatedly flagged risks about Latvian banks’ heavy exposure to nonresident account holders. Still, it was the U.S. Treasury that brought the issue into the open.
Following the U.S. Treasury’s move, the ECB froze all payments by ABLV.
The ECB, which directly oversees ABLV, has defended its supervision of the bank, saying under EU law only national anti-money-laundering authorities can investigate their banks.
Write to Patricia Kowsmann at [email protected]
Source : WSJ