ABLV Bank will be liquidated in accordance with Latvia’s laws, because preservation of this credit institution is not in the interest of the country’s society, announced the European Central Bank.
In the report, ECB concluded that ABLV Bank and its subsidiary ABLV Bank Luxembourg were expected to collapse in the near future. ECB has informed the board of European Single Resolution Mechanism of its decision. The latter concluded that no measures were needed to achieve full regulation of those banks, because it would not fit with society’s interests.
This is why liquidation of those banks will be performed in accordance with laws in Latvia and Luxembourg, as ECB mentioned in its announcement.
In regards to the decision in accordance with which ABLV Bank “is expected to collapse”, ECB notes: “Because of significantly worsened liquidity, it is expected the bank will not be able to pay its debts and perform other commitments within specified terms. The bank lacks funding to handle increased outflow of deposits before the deposit guarantee fund’s payment procedure begins.”
ABLV Bank is under direct supervision of ECB.
Latvia’s Finance and Capital Market Commission decided that ABLV Bank had entered a state of deposit unavailability.
Because ECB has not provided any instructions to cancel established payment restrictions, FCMC Council has made the decision on unavailability of deposits to ensure payment of guaranteed compensations to the bank’s clients. This situation became a reality because FCMC has found that the bank is unable to pay its clients their deposits.
FCMC reminds that finances from Latvia’s Deposit Guarantee Fund will not be used, because ABLV Bank has enough profitable assets. According to current estimates, ABLV Bank needs around EUR 470 million to pay its clients. The bank is able to afford this.
ABLV Bank notes that FCMC’s decision in regards to unavailability of deposits for the bank means a liquidation process may be launched in the near future.
The bank believes it has completed all requirements from the regulator to restore operations. Over the course of four days, the bank had accumulated more than EUR 1.36 billion to ensure liquidity, securing 86% of all requested deposits. The bank’s representatives believe it was enough to restore operations and comply with client’s requests.
ABLV Bank associates FCMC’s decision with political reasons. (BNN/Business World Magazine)