The 124-page report reveals "Total assets of the Bank fell by 28% in the first quarter 2018. Funds at current accounts and deposits due to customers decreased to EUR 1.5 billion at the end of 1st quarter 2018 comparing to EUR 2.4 billion as at 31 December 2017."
Nevertheless, the bank said, it retains high liquidity.
The effect of legislation to outlaw doing business with offshore shell companies is also evident in the report, which says: "On 19 March 2018, the Bank decided to reclassify more than 4,000 of its corporate customers from “High Risk” category to “Prohibited Risk” category. Prohibited Risk means that the Bank is to terminate its relationship with these customers within a period of two months. In addition, customers classified as “Prohibited Risk” are not allowed to execute transactions. Account closure of a “Prohibited Risk” account is subject to increased compliance restrictions. These customers represent about two-thirds of all non-Latvian corporate customers of the Bank. The majority of these customers are domiciled outside the EU and OECD in so-called off-shore jurisdictions."
In addition, Rietumu said it was planning a major overhaul of its business strategy in the wake of the new legislation, but that it was difficult to do so without precise guidance from the financial regulator on exactly what the new rules are. The new strategy will be ready by June 2018, the bank said.
"'...due to the fact that the details of the changes in Latvian legislation are not yet published and adopted into law, there is a material uncertainty related to the above events and conditions that may cast significant doubt on the Bank’s and the Group’s ability to continue as a going concern. As a result, the Bank and the Group may be unable to realize its assets or discharge its liabilities in the normal course of business," Rietumu warned, while adding that various stress tests it had performed on itself showed the bank’s and group’s liquidity and capital adequacy levels remaining above required thresholds.
"The Board of Directors admits that material uncertainty exists in relation to the future outcomes of these events that may cast significant doubt on the Bank’s and the Group’s ability to continue as a going concern," the statement reiterates.
As recently reported by LSM, Rietumu also shook up its managing board in recent weeks, ousting the chairman and cutting the number of members serving.
