The European Central Bank warned Saturday that Latvia's third-largest lender ABLV was at risk of failing after freezing payments following money laundering allegations from Washington. "Due to the significant deterioration of its liquidity, the bank is likely unable to pay its debts or other liabilities as they fall due," the ECB said in a statement. The ECB this week announced it was freezing payments to ABLV, providing another shock to Latvia's financial sector after its central bank governor Ilmars Rimsevics was barred from carrying out his duties amid claims of bribery.
"The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit guarantee fund starts," the statement said. Last week the US Treasury Department named ABLV "an institution of primary money laundering concern" and accused it of connections to North Korea's weapons development programme. Latvian police announced Friday they had begun probing the money laundering claims.
In a statement, ABLV defended itself, insisting that it had gathered 1.36 billion euros ($1.67 billion) to strengthen liquidity. It said this "was absolutely sufficient for the bank to resume executing payments and meet all obligations towards its clients, yet due to political considerations the bank was not given a chance to do it". Latvia's Prime Minister Maris Kucinskis said his country had "made steps" in cracking down on money laundering in recent years but admitted the measures had been "not sufficient" to eliminate the practice within the financial sector.
"The responsible entities of Latvia work closely with each other and also with our international partners, including the European Central Bank and the United States," he was quoted as saying by the BNS news service. "I am convinced of both the stability of the financial sector of Latvia and the ability to take major steps to ensure that the banking sector regains its reputation."
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