Latvia's government bond hit by banking turmoil

Feb 21, 2018, 00:51
Latvia's government bond hit by banking turmoil

Separately, the US Treasury accused ABLV, Latvia's third-largest bank, of "institutionalised money laundering".

"ABLV has institutionalized money laundering as a pillar of the bank's business practices", the FCEN said in a statement linking some of the alleged activities to North Korea's ballistic missiles program.

The Corruption Prevention and Combating Bureau (KNAB) said on February 19 that no formal charges had been filed against Bank of Latvia Governor Ilmars Rimsevics, who was detained by police over the weekend.

Officials including Prime Minister Maris Kucinskis and Finance Minister Dana Reizniece-Ozola called on Mr Rimsevics, 52, to recuse himself from his duties, but didn't link the detention to the USA investigation of ABLV. Latvia does not maintain correspondent banking relationship directly with the USA, but does maintain relationships with foreign financial institutions, which, themselves, hold direct correspondent accounts in the U.S.

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The ECB froze all payments by ABLV on its liabilities yesterday, after the bank's liquidity position collapsed in the wake of the U.S. allegations, CNBC reports.

Neither Norvik Bank nor Guselnikov immediately responded to requests from Reuters for comment.

Kucinskis said he could not rule out that the bribery allegations against Rimsevics, no details of which have been given by enforcement authorities, were an attempt to damage Latvia's reputation.

ABLV is directly supervised by the European Central Bank under a new set of eurozone oversight laws, which leave the national authorities in charge of enforcing money-laundering regulations.

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Its own banking system has been plagued by corruption and money laundering scandals in recent years. The governor considers his detention to be "clearly illegal", according to his lawyer. The measure, a first for the ECB, was necessary to stabilise outflows after a "significant deterioration of bank's financial position". In July 2017, two other banks in the country banks were fined.

The Latvian government plans an emergency meeting Monday.

Finance Minister Dana Reizniece-Ozola said there are no signs of a threat to the Latvian financial system. The bank has seen an outflow of 600 million euros in both deposits and securities since the Treasury report, Peters Putnins, chairman of Latvia's Financial and Capital Markets Commission, said in an interview with public broadcaster on Tuesday. She made no connection between the bank and Rimsevics.

Senator delays vote on United States budget deal
The brief shutdown follows a three-day shutdown last month, over numerous same spending and social issues. The Office of Management and Budget says it is preparing for a lapse in appropriations.

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