Latvia calls emergency meeting after third-largest bank fails

RIGA (Reuters) – Latvian authorities will gather for an emergency meeting on Monday following the failure of the country’s third-largest bank, the Prime minister said on Saturday, as the country kept watch for any fallout on other banks.

ABLV Bank is failing or likely to fail and will be wound up as saving it is not in the public interest, the European Union’s Single Resolution Board and the European Central Bank (ECB) said separately on Saturday.

Accused by U.S. authorities of large-scale money laundering, ABLV scrambled this week to come up with a survival plan, but failed as customers fled and management could not come up with sufficient cash, despite offers of emergency central bank liquidity.

Latvia’s Finance Minister Dana Reizniece-Ozola said the situation in other banks was stable and that the level of deposits at around 20 billion euros ($25 billion) had not changed significantly.

Reizniece-Ozola added that the regulator was demanding and receiving regular information from private Latvian banks.

Other banks at risk in Latvia are those that, like ABLV, specialize in accepting foreign deposits, Reizniece-Ozola told Reuters on Friday. She said she had a list of more than a dozen lenders that fitted this description and could therefore be affected in some way.

Prime Minister Maris Kucinskis said Latvian authorities and local and international experts need to agree on the next step in order to improve financial supervision.

“That´s why the emergency meeting of the Financial Sector Supervision Council has been called on Monday … and this question has also been put on the agenda of the government (next week),” Kucinskis said in an emailed statement to Reuters.

Privately held ABLV, Latvia’s third-biggest bank, has been in focus since U.S. authorities accused it of covering up money laundering, bribing officials and facilitating the breach of sanctions against North Korea.

The money laundering accusations, denied by the bank, destabilized the lender and around 600 million euros worth of deposits left within days, forcing the ECB to suspend all payments on Monday to prevent a disorderly collapse.

“I am convinced both about the stability of the Latvian financial sector and the ability to take significant steps so that the banking sector could regain its reputation,” Kucinskis said.

($1 = 0.8135 euros)

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