Banks, Financial Services, Investments, Legislation, Lithuania

On Wednesday, the Government announced an unprecedented decision – it said it took over the Snoras bank from its shareholders. Prime Minister Andrius Kubilius, Finance Minister Ingrida Simonyte and Board Chairman of the Bank of Lithuania Vitas Vasiliauskas said that the Government took over the assets of Snoras and removed the leadership of the bank, informs LETA/ELTA, referring to Respublika.

A temporary administrator, Simon Freakley, Zolfo Cooper LLP, senior partner, was appointed to take over the functions of the Snoras's Supervisory Council, its Board and heads of its administration. "The analysis of information compiled for supervisory purposes revealed a poor quality of the assets of the Snoras bank, and that the evaluation of assumed risk was inappropriate due to the lack of responsibility," the Bank of Lithuania officially said. The Cabinet of Ministers decided to nationalise Snoras in hardly an hour and 20 minutes, but experts say that there were long and thorough preparations for this process. The suspended operations of the Snoras bank will be resumed on Monday.

All the insured deposits with the Snoras bank are said to be safe. By Wednesday afternoon, a 68.1-% holding of Snoras was owned by Russian citizen Vladimir Antonov, who lives in London, 25.31 percent of the shares belonged to Lithuanian citizen Raimondas Baranauskas and the remaining shares were owned by minority shareholders.

"I think that they simply took away the private business because Snoras was a pain for Scandinavian banks. Snoras was the largest bank which was not owned by Scandinavians. Actions were made accurately to eliminate Snoras from the banking sector, to root out the pain which probably was an obstacle to Scandinavians and was a serious competitor," President of Snoras and Board Chairman Raimondas Baranauskas said, currently on a visit to Ukraine.

Most of the financial market experts refuse to comment on the situation with Snoras because they are in one way or another related to Snoras or other banks. It only shows that the case is sensitive, though it may be too exaggerated too. The Lithuanian Government is most likely to take over the Snoras bank according to a similar scenario as Latvia did for its Parex bank two years ago. Interim preventive measures were applied for some time, Parex clients had problems when trying to withdraw cash, but later on they recovered all their assets. The nationalization process may take half a year or even longer, but the bank's operations should not be hampered by that. "I expect the Government and the Bank of Lithuania to manage to explain to all of us about Snoras and why they undertook such actions," MP Kestutis Dauksys, member of the Seimas Committee on Economics, said Kauno diena.

Snoras heads were shocked to learn about the Government's actions. "How can a man feel after his business is taken over in a middle of a day? It is a theft in the direct meaning of this word. We will not keep silent about that. If we give up, other private Lithuanian companies will be ruined. We are accused of too low liquidity of the bank, but why did they hinder us to raise the authorised capital for half a year? It is a political clampdown with a private bank made by the president and the Bank of Lithuania, which will have painful consequences for the entire country," President of Snoras and Board Chairman Raimondas Baranauskas said yesterday, informs Lietuvos rytas.

The central bank said it had found irregularities at Snoras, implying a criminal activity because of the allegedly missing securities.

The Government also said it planned to reorganise the Snoras bank into a state-owned bank which would hold good assets and all the insured deposits.

Wednesday afternoon, the Snoras bank had its operations suspended across the country. They are said to be resumed on Monday.

The Board of the Bank of Lithuania will decide on further actions in its nearest sitting.