FCMC decided to launch the revoking of the licence because the bank has been making serious breaches in many of its business areas for a long time. Because of that, it has been decided that it is not possible to apply specific regulations to the bank and save it in the interest of the public.
Gundars Grieze, Chairman of Trasta komercbanka, says the bank’s legal team is currently considering the option of challenging ECB’s decision in court.
FCMC has concluded that Trasta komercbanka has no critically important functions, it is not an important bank and its exclusion from the market will not impact the stability of Latvia’s financial sector all that much. In the event of the bank’s liquidation, all of its clients will be paid the state guaranteed compensation of EUR 100,000. This will ensure protection of interests of 93% of the bank’s clients, notes FCMC. It has also been decided that saving the bank is not in public interest.
At the end of January, FCMC prohibited Trasta komercbanka to carry out debit transactions with amounts exceeding EUR 100,000 per client. This is because the bank failed to attain progress in sorting out multiple important banking areas – capital increase, bank business development strategy and improvement of its internal control system. It is also worth taking into account that FCMC had previously warned two of the bank’s largest shareholders – Igor Buimisters and Ivan Fursin – about their inability to properly comply with requirements stated in the Law on Credit Institutions.
FCMC has concluded that the bank has been working with losses for a long time and that the bank’s current business model is not sustainable. On top of that, FCMC believes the bank has failed to develop a business strategy that would comply with the actual situation on the market.
Considering all the breaches committed by the bank up to this point, the European Central Bank has decided to revoke Trasta komercbanka’s licence following a request from FCMC. The decision of ECB came into force on 3 March at 00:00 local time.
The goal of the single relief mechanism of the Union of European Banks is to save banks that end up in difficulties with minimal expenses and reduce the possible impact to national economy to a minimum. However, assistance can only be provided in instances when a specific bank’s rescue is required in the interest of the public (if the bank carries out important financial functions and plays a major role in economy). In all other cases, the bank can be liquidated as part of an insolvency process, explains FCMC.
Following FCMC’s January decision, Trasta komercbanka had announced its intentions to present a new investor. The bank had also pointed to the fact that 15 March would mark the conclusion of the 15th release of bonds, which would bring the bank EUR 15 million in capital increase. According to the bank’s latest annual account, its base capital was EUR 20,642,000 on 30 September 2015. The release of bonds in March would increase the bank’s base capital to EUR 35,640,000.
Trasta komercbanka was founded in 1989. It offers services to local and foreign clients. Outside of Latvia, the bank’s group has representatives in Russia, Ukraine, Kazakhstan, Tajikistan, Azerbaijan and Cyprus.
In Q3 2015, Trasta komercbanka was the 13th largest bank in Latvia based on assets.
The bank concluded 2015 with losses worth EUR 4.66 million. The group’s total losses for 2015 were EUR 6.21 million.
On 17 December 2015, officers of State Police Economic Crimes Prevention Office carried out a search in the bank’s office building in Riga, Palasta Street 1. Two of the bank’s employees were detained.
The bank’s public relations specialist Elina Bikulca had reported that time that the two employees were suspected of being involved in the laundering of EUR 13,000.
ENAP reported, without mentioning the name of the bank, that two employees of a Latvian commercial bank were detained based on suspicion of money laundering. A criminal process has been launched against the two bank employees shortly after.
De Facto programme of LTV reported that it is possible that it was Trasta komercbanka’s board member Viktors Ziemelis who was the one who organized the money laundering scheme in the bank. He has since been dismissed from his post.
The programme reported that the search in Trasta komercbanka was related to another money laundering scheme that was uncovered in Russia. Roubles were used to procure securities and sell them through European banks. This method made sure the clients’ money ended up on offshore accounts. The same scheme is currently investigated by American authorities against Deutsche Bank, which ended up in an international scandal last October.