The Financial and Capital Markets Commission (FCMC) has asked the European Central Bank (ECB) to cancel the license granted to ‘Baltic International Bank’ to operate a credit institution, said FCMC chairman Santa Purgaile at a press conference on Tuesday.
He said he could not say when the ECB will take a decision on canceling the licence. “We have sent the ECB an application to cancel the licence. The ECB has its own internal processes to follow in reaching this decision,” Purgaile said, noting that the process will not affect the payment of the guaranteed benefits, which will start within seven working days of the licence. ‘ascertainment of the unavailability of the securities.
Purgaile also said the bank has been under enhanced supervision for a long time, to which different supervisory measures have been applied. Various legal obligations were also enforced to stabilize the operation, but the bank was unable to fulfill them.
In addition, Purgaile explained that as early as the beginning of the year, when the bank announced new investors, the FCMC mandated to conduct investor research, create the bank’s strategy and present the bank’s business model, but that is not been done up to now.
The bank hasn’t been able to implement a viable model for a long time to ensure profitability, Purgaile stressed. There were also management problems and it was not possible to implement effective law enforcement with the prevention of financial crimes. Sparrow you see
stated that these are internal management risk assessment systems capable of assessing risks. The bank’s internal procedures did not match its business model.
Assessing the impact on society, the FCMC has decided not to proceed with bank resolution or stabilization of the bank’s operations. Purgaile said that considering the fact that the bank is one of the smallest in Latvia and has a limited number of customers, the bank’s closure will have no impact on the financial sector.
When asked whether the criminal proceedings brought by the State Police regarding the legalization of the proceeds of crime in the bank were related to or in any way contributed to or accelerated the FCMC’s decision, Purgaile said that the FCMC was informed of the actions of the FCMC police , but the decisions of the FCMC would be followed regardless of the actions of the police.
At the same time, Purgaile said that she was not informed about what criminal case was initiated. It has already been reported that on Monday, December 12, the FCMC board decided to suspend the provision of financial services to “Baltic International Bank” in a emergency meeting.
At the same time, the police special operations unit broke into the building of the “Baltic International Bank” on Grēcinieku street in Old Riga on Monday evening and broke down the front door, LETA news agency noted. Unofficial information shows that the searches also took place in the residences of bank officials.
According to the information available to the LETA agency, the investigative activities of the “Baltic International Bank” took place as part of a criminal case for possible large-scale laundering of illegally obtained funds.
Without mentioning the name of the bank, State Police Press Officer Ilze Jurēvica confirmed to LETA that the police are investigating a criminal case for possible large-scale laundering of the proceeds of crime and that criminal procedural actions are being conducted in Riga on Monday 12 December.
No one has been arrested at this time and police will not comment further.
The FCTK’s decision stipulates that on December 12 at 18:00 the bank had to completely stop providing financial services, including processing customer payments. This means that from this moment the operation of cards, Internet banking and payments of “Baltic International Bank” has been suspended. This decision was made to prevent the outflow of funds from the bank and to protect the interests of the bank’s customers and creditors.
The FCMC recognized “Baltic International Bank” as a financial institution that has fallen or will fall into financial difficulty and has decided not to proceed with the resolution of “Baltic International Bank”, i.e. not to implement measures to stabilize the bank’s operation.
This decision was made by FCMC because the bank was unable to ensure that a viable strategy was implemented for a long time. The previous operating strategy did not meet the bank’s capabilities and is not feasible, so the bank has not provided a profitable business model for a long time. The bank also had serious weaknesses in its internal governance, including in the areas of money laundering and terrorism prevention and proliferation financing.
The law stipulates that a decision on the unavailability of deposits must be taken within five working days from the day the FCMC determines that the bank is unable to repay the deposits. Payment of the guaranteed compensation must be initiated no later than seven working days following the day on which the unavailability of deposits occurred.
Further information will be available to customers on the FKTK website.
In early March this year, “Baltic International Bank” reported that the owners of the majority shares, Valerys Belokonis and Viloriis Belokonis, agreed to sell some shares to UAE Sheikh Hamad bin Khalifa bin Mohammed al Nahyan States (UAE), which would thus become the largest shareholder of the bank. The transaction was expected to be completed after receiving approval from the European Central Bank and FCTK, but has not been received.
In August, the FCTK board fined ‘Baltic International Bank’ EUR 5,325 for failing to submit and publish an audited annual report on time.
This year, “Baltic International Bank” worked with a loss of 7.186 million euros in nine months, which is 3.6 times higher than in the corresponding period last year. The bank’s assets amounted to 195.29 million euros as of 30 September 2022, which is 7.1% or 14.88 million euros less than at the end of 2021, when the assets of “Baltic International Bank” was 210.171 million euros.
At the end of September, the amount of capital and reserves of “Baltic International Bank” was 33.519 million euros, 8.3% less than at the end of 2021.
“Baltic International Bank” worked with verified losses of 5.091 million euros last year, which is 4.3 times more than in 2020. On the other hand, the bank’s assets amounted to 210.771 million euros as of December 31, 2021, or 3.1% or 6.675 million euros less than at the end of 2020.
The largest shareholders of the bank at the end of September 2022 were Valerys Belokon (38.13%) and Vilory Belokon (21.3%). In terms of assets, “Baltic International Bank” was the 10th largest bank in Latvia at the end of 2021.
