Regulator calls for change in Latvia's insolvency laws

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When a bank becomes insolvent or undergoes liquidation, the Financial and Capital Market Commission (FKTK) should only revoke the bank's license - it should not have to also nominate the bank's insolvency administrator, the commission's chairman Peters Putnins told the LETA newswire July 16.

"I believe that FKTK's competence should not extend beyond revoking the license. Once the license is annulled, the liquidation or insolvency administration of the bank should continue without the FKTK's involvement. Tried and tested, competent persons should then take over, persons who would not steal from the creditors and are able to bring the case to an end themselves," said Putnins.

FKTK's employees do not specialize in insolvency cases, added Putnins. "Speaking of administrators, the question is whether the commission should be the one to nominate them. Strictly speaking, we are not specialists on insolvency cases. Right now, we have to check such aspects as the person's reputation, and even when we do that we consult the authorities, which have more information than we do. We assess competences and make sure that the person understands what he will have to do, and we choose candidates with the best qualifications. But here I have to say that this is something we have inherited from the 1990s," explained Putnins. It was a time when the first wave of bank liquidations started. Now the situation is completely differed, he said.

Presently, it is the FKTK that nominates an administrator, who is then confirmed by a court. "He is a public official, his work is regulated by the law, he has the entire responsibility, he takes over all functions of the bank's board, and he has received a mandate from the court." Therefore, the FKTK can do very little to influence any processes, said Putnins.

He believes that the current mechanism has to change. "The commission, a banking watchdog, gets drawn in all that liquidation or insolvency process and, given that there are practically no good examples, the commission's reputation suffers, for no reason. Policymakers should think about insolvency processes and find a better way. If is for that reason that, realizing our responsibility, we supported self-liquidation of ABLV," said Putnins.

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