The European Central Bank said Saturday it has determined that Latvia's crisis-struck ABLV Bank is failing or likely to fail, and the bank will be wound up under its home country's law.
Latvia's financial regulator on Monday ordered ABLV, Latvia's third-largest bank by assets, to cease all payments at the ECB's request amid U.S. accusations of money laundering and breaching sanctions on North Korea. The order came after the bank saw an abrupt wave of withdrawals and was unable to access U.S. dollar funding.
The European Central Bank said in a statement on Saturday that it has concluded ABLV is "failing or likely to fail," along with a Luxembourg-based subsidiary, ABLV Bank Luxembourg,
"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. "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."
It said Europe's Single Resolution Board determined that action on its part "was not in the public interest," so the bank will be dissolved under Latvian law and the Luxembourg subsidiary under that country's law.
Deposits in ABLV, which was founded in 1993, are protected up to 100,000 euros ($123,000) by a deposit guarantee fund in Latvia, the ECB said. At the end of last year's third quarter, it reported deposits of 2.67 billion euros ($3.28 billion) and assets of 3.63 billion euros ($4.4 billion.)
Latvian Prime Minister Maris Kucinskis said his government won't put any taxpayer money into rescuing ABLV.
"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," Kucinskis said in a statement. He said a supervisory board for the country's financial sector will hold a special meeting Monday.