Financial Services, Latvia, Legislation

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Court declares Trasta Komercbanka insolvent

BC, Riga, 10.03.2017.Print version
Riga City Vidzeme District Court today declared Trasta Komercbanka insolvent, LETA was told at the court.

The court ruling paves the way for the bank’s bankruptcy procedure. Ilmars Krums will continue as the bank’s administrator as the court rejected the Financial and Capital Market Commission’s (FCMC) request to replace him with Armands Rasa.

The verdict is final and cannot be appealed.

FCMC spokeswoman Laima Auza told LETA that the reasons for the court’s refusal to confirm Rasa as the bank’s administrator remained unknown but that the FCMC respected the ruling.

The FCMC, however, will look for a new candidate for the position of insolvency administrator because Krums has decided to quit as Trasta Komercabnka’s insolvency administrator. “Krums will be performing his duties until the court approves the new insolvency administrator,” Auza said.

Earlier, FCMC spokeswoman Auza told LETA that the banking regulator had received an application from the bank's liquidator, Ilmars Krums, for starting an insolvency proceeding against Trasta Komecbanka and had forwarded the application to Riga City Vidzeme District Court, asking it to appoint Armands Rasa as the bank’s insolvency administrator.

"During the liquidation process of Trasta Komercbanka it was established that the bank's assets are insufficient for full payment of all claims by the creditors," Auza said. According to the information from the bank's liquidator, as on January 31, 2017, Trasta Komerbanka's liabilities totaled EUR 124.6 mln, including the creditors' claims for EUR 121.1 mln while the bank's assets stood at EUR 73 mln.

The liquidator of Trasta Komercbanka managed to recover EUR 111.94 mln, and the bank's depositors were repaid the guaranteed deposit amount (up to EUR 100,000 per depositor) from the banks funds without borrowing any money from the Deposit Guarantee Fund.

“Most often, the assets of a bank under liquidation cannot be sold for the balance sheet value and in case of confiscation the market value can be lower. It depends on the asset sale strategy chosen by the liquidator. Considering the existing situation, the liquidator of Trasta Komercbanka decided to start the bankruptcy process and file for the bank’s insolvency, which is why he submitted the insolvency application to the FCMC,” the regulator’s representatives said, adding that Krums had decided to step down as the bank’s insolvency administrator.

The FCMC also said that the regulator had picked Rasa as the bank’s new administrator, but that it was up to the court to confirm him in this position.

The European Central Bank (ECB) has revoked Trasta Komercbanka's license, based on a proposal submitted to the ECB by the Latvian financial watchdog, the Financial and Capital Market Commission, and the bank's operations were halted on March 3, 2016.

According to the Financial and Capital Market Commission, Trasta Komercbanka has been operating with losses for a long period and has no viable business model or development strategy adequate to the situation. In addition, serious and sustained breaches of the anti-money laundering and counter-terrorist financing regulations were identified in the bank's activities.

On March 14, 2016, a court in Riga ruled to begin the liquidation process of Trasta Komercbanka and appointed a liquidator, lawyer Ilmars Krums.

At the end of 2015, Trasta Komercbanka was the 14th largest Latvian bank by both assets and deposits, according to the Latvian Association of Commercial Banks.

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