Connect with us

Economy

Latvian Regulators Warn That More Banks Could Close This Year

Published

on

The Financial and Capital Market Commission of Latvia has warned that more banks serving predominantly foreign clients would close or be forced to merge if they do not change their business model. The warning came following the announcement that the country’s third largest bank – ABLV, will be closing down after being accused of money laundering by U.S. authorities.

Almost a dozen banks in Latvia serve as a gateway for clients from neighbouring countries to the West. ABLV and ten other banks take deposits from clients in Russia, Ukraine and other neighbours. The bank denied the allegations of money laundering, but that did not stop U.S. regulators from freezing it out of dollar denominated transactions, which effectively killed off the business. Executives from other banks also mentioned that they had been struggling since the crash of ABLV, as they face similar threats from the U.S., if found guilty of money laundering.

Speaking to Reuters, the Chairman of the Latvian watchdog, Peters Putnins issued the warning to other banks, without mentioning any in immediate danger. He also assured that the country’s banking industry was stable, despite clients withdrawing $620 million of deposits. The country is confident that banks dealing mainly with its own citizens had nothing to fear, though it could not prevent the spate of panic-withdrawals.

“If you ask me on the viability of the existing business model, of course this is not viable anymore,” he said. “They can change their business model, if they are able to. They can merge. They can liquidate themselves, which is a solution … if they do not see a future for their enterprises.” Putnins also said banks should be prepared for more large pay-outs, though there is no fear of the market becoming destabilised.

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

five − one =