Banks, Financial Services, Latvia

International Internet Magazine. Baltic States news & analytics Monday, 16.09.2019, 03:47

PNB Banka’s new shareholders had to demonstrate their wish to strengthen the bank’s capital sooner – watchdog

BC, Riga, 20.08.2019.Print version
PNB Banka’s new shareholders had to demonstrate their wish to strengthen the bank’s capital sooner, and not wait until the bank’s operations are halted, said Finance and Capital Market Commission’s (FCMC) head Kristine Cernaja-Mezmale at the Saeima budget and financial (taxation) committee meeting today referred LETA.

“The wish to strengthen the bank’s capital had to be demonstrated sooner, the new investors had not been able to prove that they have the necessary funds. If FCMC does not have the fact, if the required documents have not been submitted, this tough decision had to be made,” she said.

Cernaja-Mezmale underscored that the new bank’s shareholders until today have not filed with the European Central Bank and FCMC the documents that prove that they have the funds necessary for increase of the bank’s capital and have not proved that they are able to make the decision.

“It is the utmost decision of the banking watchdog, and shareholders until the set date had a chance to prove their capacity,” said Cernaja-Mezmale.

Commenting on the request of the new shareholders to give them another 90 days for preparing the necessary documents, FCMC told LETA that the banking watchdog and the European Central Bank (ECB) has several times applied supervisory measures on the bank, giving the bank time to meet the requirements, but the bank did not complete these tasks.

“FCMC cannot base its actions on the opinion voiced in the media. FCMC decision on halting the bank’s operation and unavailability of deposits was based on the decisions of the ECB and the Single Resolution Board. Now FCMC is preparing the claim for insolvency that will be submitted to the court this week,” she said.

PNB Banka’s board member Anna Verbicka told LETA that on August 1, the bank submitted to the Single Resolution Board information on the investments in the bank capital planned by investors, but on August 6 a letter was received, requiring additional information until August 13.

“The bank’s board and new shareholders signed and filed in time the necessary documents, proving their wish to invest additional money in the bank’s capital,” said Verbicka. She said that the new shareholders had planned to invest their shares in oil extraction companies into the bank, sell them in the capital market and thus, obtain the necessary funds. The investors need 90 days to conclude the deal.

As reported, the Latvian Financial and Capital Market Commission (FCMC) decided that as of August 15, PNB Banka must completely cease the provision of financial services, including the execution of customer payments. Such a decision is taken to avoid the outflow of bank’s funds.

The European Central Bank (ECB) has declared PNB Banka failing or likely to fail in accordance with the Single Resolution Mechanism Regulation.

According to the ECB, the bank has been in breach of capital requirements since the end of 2017.

''PNB Banka had been called on by the competent authorities to restore compliance with prudential requirements on several occasions and given sufficient time to take measures. The bank consistently failed to implement remediation measures,'' the ECB said.

The ECB took over direct supervision of PNB Banka on April 4, 2019, at the request of the Financial Capital and Markets Commission.

On July 11, 2019 the ECB issued an early intervention decision, requiring the bank to address its capital shortfalls and other deficiencies according to a specific timeline.

The Deposit Guarantee Scheme ensures the disbursement of deposits up to EUR 100 000 for each customer of PNB Banka in the form of a guaranteed compensation.

It was also reported that in late June the bank representatives reported that a group of US and European investors has purchased 60 percent of the bank’s shares. Names of the shareholders were not revealed. The Latvian public television reported that one of the new shareholders is billionaire, gas and oil magnate Roger Tamraz.

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