Analytics, Banks, EU – Baltic States, Financial Services

Although recently Germany's leading bank, Deutsche Bank, stopped providing correspondent banking services to Estonian and Latvian banks and cut off access to dollar clearing facilities for them, this decision does not concern Krediidipank anymore. "Our cooperation with Deutsche Bank ended already last fall and thereafter we have used other mediators," told head of business customer banking at Krediidipank Hans Pajoma.

According to Pajoma the number of banks that provide dollar clearing services will probably fall in the coming years. "This not only concerns Baltic countries, but is a global trend, as a result of which it will be more difficult for smaller banks to find cooperation partners to mediate dollar payments," he said.

An international group of investigative journalists at the end of March published their findings on how banks laundered 20.8 bln U.S. dollars of Russian money of allegedly illicit origin, of this nearly 1.6 bln dollars through Estonia. A document leaked to the Organized Crime and Corruption Reporting Project (OCCRP) team lists tens of thousands of companies and reveals how Estonian accounts of little-known offshore companies were used to move sums that equal a sixth of country's state budget. The lion's share, 1.18 bln U.S. dollars, of the funds moved through Estonia were transferred via accounts at the Estonian branch of Danske bank.

Danske Bank at the beginning of 2015 informed the public of its decision to restructure its commercial activities in the Baltic states and to focus on servicing corporate and private banking clients. It said that starting from June 1 that year, Danske Bank will only enter into new credit agreements with companies and private banking clients.

Making U.S. dollar payments in Estonia and Latvia may become extremely difficult if Deutsche Bank should stop handling dollar settlements here, Aivar Paul, head of prevention of money laundering at LHV Pank, said then. "It will definitely not happen at the same price, it will definitely not happen as quickly, and I'm not ruling out that it will not be possible to conduct all transactions then," he added.

Deutsche Bank last year posted EUR 1.4 bln in loss, and this has been the second consecutive year the bank sustained loss. Recently also large fines had been slapped on the bank, for example, in January New York's and British authorities imposed a fine of 630 mln dollars on the bank for inability to prevent money laundering in Russia.

According to risk manager of Eesti Meedia, Erki Haamer, who previously worked as risk manager of Baltic banking at the Finnish OP bank, told on Monday that Deutsche Bank leaving the market should not have a big impact on bigger banks because they can always use their parent banks as correspondents and their contra correspondents.