ABLV bank payments suspended by European Central Bank

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The European Central Bank has acted to suspend client payments at Latvia's ABLV bank pending an inquiry into allegations by the U.S. Treasury of institutionalized money laundering, as previously reported by LSM.

A statement from the ECB said:

Temporarily, and until further notice, a prohibition of all payments by ABLV Bank on its financial liabilities has been imposed, and is now in effect.

In recent days, there has been a sharp deterioration of the bank’s financial position. This follows an announcement on 13 February by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network to propose a measure naming ABLV bank an institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act.

A moratorium was considered necessary given that the bank is working with the Latvian central bank and authorities to address the current situation.

A statement from the bank said:

In order to stabilise the situation and in accordance with the instructions of the European Central Bank, on 19 February 2018, Financial and Capital Market Supervision Commission made a decision to set temporary settlement restrictions on clients’ debit operations.

Such decision is made in order to give the bank sufficient time for taking actions for stabilisation of the existing situation and accumulating the funds necessary for ensuring normal operation.

As one of the stabilisation steps, the Bank has decided to pledge a part of securities at its disposal asking the Bank of Latvia, in turn, to issue a loan up to EUR 480 million. By the end of 2017, the bank was having at its disposal liquid securities amounting to almost EUR 1.7 billion.

The structure of the bank’s assets is balanced, yet given the unfolding events currently transfer and sale of assets may require longer time than it is in standard situations. Therefore, the bank now needs to take measures for ensuring availability of sufficient financial assets.

As the third-largest bank in the country and the largest locally-owned bank, ABLV is one of three banks supervised directly by the European Central Bank in addition to the Financial and Capital Markets Commission (FKTK).

An extraordinary meeting of FKTK's council on the night of February 18 said that "in accordance with the instructions of the European Central Bank" it had decided to "temporarily set payment limits, preventing debit transactions from being executed on client accounts in any currency."

The restrictions came into effect at midnight.

FKTK Chairman Peters Putninš said: " This is a decision of the European Central Bank and we have adopted it on the basis of the ECB's instructions. The main task of the financial supervisory authorities is stability in the sector as a whole... We will continue to take the necessary supervisory actions in cooperation with the ECB."

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