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The ECB blocked payments to the third largest bank in Latvia

ABLV Bank

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The European Central Bank (ECB) blocked payments to the third largest bank in Latvia, ABLV Bank AS. The measure came after the authorities in the country earlier arrested the Governing Council of the European Central Bank (ECB) Ilmars Rimsevics. The detention was followed by a search in the home and office of Rimsevics.
The events are a blow to Latvia – a Eurozone country that only last year managed to return its economy to its pre-crisis levels after losing over a fifth of its output during the economic downturn.
“This means that a temporary, until a second order, enforces a ban on making any payments of ABLV Bank AS on debts and finances”, said the ECB, adding that “there has been a sharp deterioration in the bank’s financial position in recent days”.
For its part, Finance Minister Dana Reizniece-Ozola said the reasons for the actions against the ECB’s Governing Council member will be announced later this day. She also pointed out – without specifying whether the detention had anything to do with the ABLV Bank, that it was possible that Latvia’s credit rating could suffer, and called on Rimsevics to withdraw from office, at least until the investigation against him.
“Every day, when Rimsevics remains in the leadership of the central bank, it significantly worsens the situation”, said Dana Reizniece-Ozola.
Rimsevics is part of the Governing Council of the ECB since 2014 when his country adopts the Euro. Previously, he was part of the government of the central bank in his homeland. According to his lawyer, he was detained at a police station, but no charges were brought against him.
Reuters reports that the reasons for suspending payments to ABLV Bank are due to accusations by the US authorities that the bank has violated the sanctions regime against North Korea.
ABLV Bank is one of the banks in Latvia that has received support to maintain its liquidity from the central bank in the country. For this reason, Dana Reizniece-Ozola also indicated that the ministry has changed its lending strategy and will refrain from refinancing operations in the near future.
She also added that Riga has already turned to Washington asking the US authorities to share the information they have about the bank.
Last week, the US Treasury Department asked for sanctions against ABLV Bank for allowing its customers to work with North Korea.
ABLV Bank chairman Ernests Bernis said the bank was the subject of a “deliberate slander campaign”.
In an attempt to shake up suspicions that its banks hold capital of doubtful origin, the bank authorities in Latvia imposed fines on three financial institutions that had accounts of financial fraud in Moldova in 2014 amounting to 1 billion USD. Last year, five banks in the country agreed to pay fines for failing to carry out the necessary checks and to gather enough information about transactions and beneficiaries of North Korea-related transactions.