RIGA (Reuters) - Latvian lender ABLV, accused by U.S. authorities of money laundering, is not of systemic importance and there is no broader panic in the financial sector, the Baltic country’s chief financial supervisor said on Friday.
Euro zone member Latvia, which shares a border with Russia, has been rocked by accusations that its third biggest lender is engaging in large-scale money laundering for Russian and Ukrainian customers, a problem that may stretch beyond ABLV as about 40 percent of deposits in the country are from abroad.
The ECB has given ABLV until Friday to plug a financial hole and Vadims Reinfelds, the bank’s deputy chief executive, admitted that winding down the privately held bank is a possible outcome.
“We do not see panic in the market at the moment,” Peters Putnins, the chairman of the Financial and Capital Market Commission told journalists, adding that he did not believe the bank was of “systemic” importance.
In a separate case, central bank Governor Ilmars Rimsevics, a member of the European Central Bank’s rate-setting Governing Council, was briefly detained by anti-corruption police and faces accusations of soliciting a bribe, shaking confidence in the sector.
Both ABLV and Rimsevics deny the accusations, which pushed Latvian bond yields higher as investor confidence crumbled and forced the ECB to suspend all payments at ABLV to prevent its collapse amid an exodus of deposits.
To stay afloat, ABLV has asked for up to 480 million euros worth of emergency central bank funding. It has already received 97.5 million euros and the Bank of Latvia has yet to make a decision on further support.
Asked whether the authority was monitoring other banks for money laundering, he said that it was not limiting its supervision activity to ABLV. But he did not provide any further details or comment on the ABLV case.
The ECB, which has declined to comment on the ABLV case, has said it has no legal powers to investigate money laundering as these responsibilities are delegated to national authorities in the 19-member currency bloc.
Reporting By John O'Donnell and Gederts Gelzis; Writing by Balazs Koranyi; Editing by Gareth Jones