The European Central Bank (ECB) has suspended the operation of Latvia’s sixth largest bank PNB Banka with €550mn in assets a couple of days after conducting on-site checks.
The ECB assessed that PNB Banka was failing or likely to fail in accordance with the Single Resolution Mechanism Regulation, the ECB said on its website.
The decision on the shutdown came just three days after an on-site inspection of the Frankfurt-based bank unveiled a substantial provisioning shortfall and found that the assets of the bank were less than its liabilities.
In a separate release, the eurozone’s Single Resolution Board said that saving the bank was not in the public interest and it would be shut down under Latvian law.
"We would like to inform that in accordance with the decision of the Financial and Capital Market Commission from 21:00 on August 15, 2019 AS "PNB Banka" must cease the provision of financial services," PNB Banka said in a statement.
"The disbursement of guaranteed compensation shall be started not later than on the 8th working day (i.e., starting from 27.08.2019). FCMC which decides on the procedures for the disbursement of guaranteed compensation will make every effort to start the payout sooner."
Eligible deposits in AS PNB Banka are protected up to €100,000 under Latvia’s deposit guarantee fund.
PNB Banka, which operated under the name of Norvik Banka until November 2018 was founded in 1992. At the end of the Q1 2019, it reported deposits of €472mn and total assets of €550mn.
The bank has been in breach of capital requirements since the end of 2017.
The ECB took over direct supervision of the bank in April, at the request of the Latvian Financial Capital and Markets Commission after in light of the ongoing controversy between PNB Bank and the central bank.
The bank's then key shareholder Grigory Guselnikov, who has dual Russian and British citizenship, accused central bank governor Ilmars Rimsevics of attempting to extort money from him in return for making “successful banking” possible in Latvia.
That spurred Riga’s anti-corruption police to start an investigation, which is still ongoing and was recently expanded with charges of money laundering against the former central bank governor.
Guselnikov sold his stakes to "European Union & U.S. investors" without naming the buyers at the end of June. On July 30, Oliver Bramwell stood down as PNB Bank CEO.