European authorities moved to liquidate ABLV Bank AS after clients pulled assets from the lender following US accusations that it laundered money.
The European Central Bank (ECB), which had already placed a freeze on payments by the lender, early on Saturday said in Frankfurt that ABLV was failing or likely to fail, handing it over to Europe’s Single Resolution Board.
The board said a resolution of the bank and its Luxembourg-based subsidiary is not in the public interest.
ABLV was plunged into crisis after the US Department of the Treasury this month proposed to ban it from the US financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program.
The bank responded by saying the allegations are wrong and misleading, and that it is working to provide information to the department that would help to overturn the proposal.
The Latvian central bank late on Friday tripled emergency liquidity assistance to ABLV after input from the ECB and local regulators.
The ECB previously asked the Latvian Financial and Capital Markets Commission to impose a moratorium on ABLV, which meant the bank was barred from making payments on financial liabilities including deposits and bonds until further notice.
The measure, a first for the ECB, was necessary to stabilize outflows after a “significant deterioration of bank’s financial position.”
“The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said in a statement. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit guarantee fund starts.”
ABLV and a subsidiary are to be wound down under Latvian and Luxembourg law, meaning eligible deposits are protected up to 100,000 euros (US$123,000), the board said in a statement on Saturday from Brussels.
The bank said its liquidation might be started “in the nearest future” and that “the amount of its assets is sufficient to satisfy demands of all clients and creditors.”
ABLV saw 600 million euros of deposits and securities withdrawn after the US department’s announcement, said Peters Putnins, head of Latvia’s financial watchdog.
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