Latvia's sixth-largest lender AS PNB Banka was deemed insolvent by a local court, almost a month after the European Central Bank — its regulator — declared it was "failing or likely to fail" due to inadequate capital, Bloomberg News reported.
Latvia's Financial and Capital Market Commission had petitioned the court to open insolvency proceedings against the bank Aug. 22, in accordance with the ECB and European Single Resolution Board's decisions, and said Vigo Krastiņš will be appointed as insolvency administrator for the bank if approved by the court.
The Latvian bank submitted evidence to prove its solvency and its investors are willing to inject €146 million to avoid any capital shortfall.
PNB was one of three banks to levy public accusations or submit proof of corruption against Ilmars Rimsevics, governor of the country's central bank. Rimsevics, who also sits on the ECB's governing council, was suspended at first but resumed his ECB duties in March. He is currently facing a trial in Latvia and denies wrongdoing, the report said.
Latvia handed direct regulation of PNB to the ECB in April due to being embroiled in a legal battle with the lender's former owner Grigory Guselnikov.
Guselnikov agreed to sell a majority stake to a group of investors in June following which the ECB told PNB to boost its capital.
The regulator carried out an on-site inspection in August and said the bank, which has been in breach of capital requisites since 2017, was unable to satisfy requirements for continuing authorization and that it was unable to provide assurances that it can comply with capital requirements in the near future.
After the ECB's declaration that PNB was insolvent, the bank's former and new owners claimed the watchdog did not give them enough time to complete ownership changes and bolster PNB's capital levels despite only requesting 90 days to do so. The investors also challenged the legal grounds on which regulators decided to liquidate the bank.
The ECB dismissed the allegations and said it "acted in strict accordance with the rules."
