Banks, Crisis, EU – Baltic States, Financial Services, Latvia, Legislation

The ECB also determined ABLV Bank Luxembourg, a subsidiary of the Latvian bank, failing or likely to fail, the ECB said in a statement.

''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 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,'' the ECB points out.

''On February 13, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a draft measure to name ABLV Bank an institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act. Following this announcement, the bank experienced an abrupt wave of withdrawal of deposits and a lack of access to US dollar funding. This resulted in the bank being unable to make payments in US dollars,'' the ECB went on to say.

''Subsequently, the ECB instructed the Latvian supervisory authority, the Financial and Capital Markets Commission (FCMC), to impose a moratorium on the bank to give time to the bank to stabilize its situation. A moratorium was also imposed by the Luxembourg authorities for the subsidiary of the bank in Luxembourg,'' the statement reads.

''Following the failing or likely to fail determination, the ECB duly informed the Single Resolution Board (SRB), which determined that resolution action was not necessary as it was not in the public interest for these banks. As a consequence, the winding up of the banks will take place under the law of Latvia and Luxembourg, respectively,'' the ECB goes on to say.

''Eligible deposits in ABLV Bank are protected up to EUR 100,000 in accordance with the deposit guarantee fund in place in Latvia. Customers can contact the bank directly or the FCMC which is the administrator for the Latvian deposit guarantee fund,'' the ECB points out.