Some Latvian lenders, focusing on providing services to clients from abroad, may need to merge or be liquidated if their business models turn out to be unfeasible, Reuters reported March 7, citing Peters Putnins, the head of the Latvian Financial and Capital Market Commission.
There are more than 10 banks in Latvia accepting deposits from customers in Russia, Ukraine and other former Soviet states, Reuters noted. In February, U.S. authorities accused ABLV Bank AS, the largest Latvian lender conducting this type of business, of money laundering, which effectively deprived the bank of access to U.S. dollar markets. Other Latvian banks pursuing similar business models have also had similar difficulties, the newswire said.
Without stating any bank names, Putnins said that lenders serving foreign clients would have to change the way they operate, merge or go through voluntary liquidation if they are not able to adjust their business models.
Customers of Latvian banks withdrew around €500 million in deposits after ABLV, which is now undergoing voluntary liquidation, was accused of money laundering. Putnins said, however, that the Latvian banking system, having a total deposit base of €19 billion, is stable, although he noted that local lenders should be prepared to make larger deposit payouts to customers in the current circumstances.
