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Regulator imposes restrictions on Trasta Komercbanka

Latvian boutique bank Trasta Komercbanka will likely face a tough time Monday after the country's financial regulator stepped in Friday afternoon to impose withdrawal limits for customers.

Customers of the headline-hogging bank, recently linked to massive money-laundering investigations, will have a €100,000 limit each on withdrawals and debits, likely to affect around 7% of its customer base.

In an announcement the Financial and Capital Markets Commission (FKTK) said it was taking the action after Trasta failed to respond adequately to previous warnings.

"The decision was adopted by FKTK after it had scrutinized the Bank's activities during the supervisory process, i.e. how the Bank succeeded in dealing with several key priorities (capital increasing, improving the Bank's development strategy and internal control system)," FKTK said.

"Also, it was taken into account that the FCMC had already issued warnings to the bank's largest shareholders possessing a qualifying holding, Igors Buimisters and Ivan Fursin, regarding their failure to fulfil the statutory obligation of shareholder having a qualifying holding under the Credit Institution Law."

"The Bank was given time to address the particular issues to improve its activities. The Bank has not managed to do it within a reasonable timeframe, therefore the regulator is compelled to take the next step and make use of instruments laid down in the Credit Institution Law – in this case to impose restrictions on the activities of the bank," FKTK chairman Kristaps Zakulis said.

The move is sure to make depositors nervous and could lead to a spate of withdrawals and possibly even a full-blown run on the bank. However, FKTK was careful not to be seen to advise on the issue saying:

"FKTK is not entitled to advise clients on how to handle their funds. That is the decision of each client. Nevertheless, the client should remember that in the term of these restrictions he can freely operate in a total amount up to the limit of €100,000."

FKTK also said problems might be experienced if depositors tried to withdraw their cash electronically over the weekend, adding: "There might be a delay in some technical solutions related to transformation of the IT systems in accordance with the FKTK limitations."

On Friday afternoon there was no mention of the new restrictions on Trasta's website and the bank did not immediately respond to LSM's attempts to get their comments.

Latvia's response to problems in its banking sector has toughened in recent months amid fears the international community is not convinced about how clean it is and that a much-hyped bid for OECD membership could be put on hold as a result.

A helpful Q & A sheet in English about the restrictions has been provided by FKTK HERE.

 

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