Latvian government tries to damp down media frenzy over bank sector

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Latvia's government took the relatively unusual step February 19 of issuing a set of English-language media bulletpoints in a clear attempt to dampen down the swirling international media speculation about the country's banking sector.

Officials have already suggested the pile-up of dramatic events could have an impact on Latvia's credit rating.

The release from the Cabinet Office said:

The position of the financial system of Latvia is sound. The government is convinced that the professional work of the regulator of the financial sector as well as law enforcement institutions provides a solid basis for solving the situation in the most appropriate way, fully respecting the interests of the people of Latvia and the international financial obligations of the country.

•               The actions taken by KNAB against the President of the Bank of Latvia are not related to any of currently operating credit institutions. The Bank of Latvia has a capable board and council, and it works effectively in its usual pace. The situation with AB.LV bank is not related to the investigation carried out by KNAB.

•               Latvia complies and will comply with its international financial obligations, and the events surrounding the President of the Bank of Latvia will have no impact on these processes. 

•               The government fully trusts KNAB and is ready to provide it with all the necessary support, preventing any influence on the work of the Bureau.

•               According to the recommendation of the European Central Bank, limitations have been imposed to the operation of AB.LV bank, which means that it is possible for the bank to receive all types of payments, while outgoing payments are limited. In addition, there are no limitations on disposing the securities, thereby accumulating the funds required for liquidity.

•               The European Central Bank has taken such a decision to stop the rapid outflow of funds from AB.LV bank and give time to prove that the bank has both a long-term business plan and the possibility to provide the necessary funds for short-term liquidity. AB.LV bank is currently drafting such a plan, and promises that AB.LV bank’s representatives will submit it to the Financial and Capital Market Commission (FCMC) by the end of the day.

Earlier, a meeting of the three parties in the ruling coalition also agreed in principle on establishing a limit of two five-year terms on any serving central bank governor. Incumbent Ilmārs Rimšēvičs has occupied the post since 2001. Many other countries already have limits on how long a single individual can occupy such a key position within the economy.  

Events in Latvia were also discussed at a meeting of Eurozone finance ministers with Eurogroup President Mario Centeno saying they had been informed about events in Latvia and describing the unfolding scandals as "at this stage a domestic issue."


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