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Sanctions imposed on several banks by the FCMC for the failure to submit and make the audited annual account public within the statutory term

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On 30 April 2019, the Board of the Financial and Capital Market Commission (FCMC) adopted a decision regarding the imposition of sanctions on several banks, as they, by the term laid down in the Credit Institution Law, namely, by 1 April 2019, had failed to prepare and submit to the FCMC the annual account for 2018 together with the certified auditor’s report (hereinafter - audited annual account), and the accounts had not been timely made public, either. Therewith, the requirement laid down by the Credit Institutions Law is violated, stating that it shall be the duty of a credit institution to prepare a public account within the set term, in order to inform the public regarding the activities of a credit institution and the financial indicators thereof.

In accordance with the Credit Institution Law a credit institution shall submit an audited annual account to the FCMC within a period of 10 days following the receipt of the auditor’s report, however not later than by 1 April of the year following the reporting year, and by 1 April shall also make the relevant account public. On 1 April this year, several banks had failed to ensure the preparation of the annual accounts and making them public. The FCMC requested additional information regarding the circumstances of failure to meet legal requirements and assessed the state of affairs of each bank on an individual basis, additionally taking note of the situation in the sector of auditors, as delays in the preparation of the audited annual account and making them public were also caused by the fact that several international audit firms had not been willing to provide it, informing to this effect with delay or terminating the concluded contract with the bank, while the capacity of the local auditors’ market, in turn, was limited. Having assessed above circumstances, the Board of the FCMC imposed various sanctions on seven banks - issuing a warning as well as imposing a fine ranging from EUR 4, 260 up to EUR 13, 490.

According to the FCMC Chairman Pēters Putniņš, "Two material circumstances were considered when assessing the individual situation of each bank. Namely, over past year, the sector of auditors in Latvia has experienced material changes, showing certain features of the lack of arrangement - audit firms may take radical decisions, refusing to cooperate at the last minute or not observing the timelines for audit. The second set of circumstances is related to the field of combating financial crime, the increased focus whereon has currently created a considerably larger burden of responsibility for both the banks and the auditors of their accounts; therewith the process of agreeing upon cooperation was much more complicated this year. Banks were not ready for this; however, provisions of law have to be respected and the FCMC has no doubts about it whatsoever. At the same time, the problematic issues identified in the sector of auditors need to be addressed at the national level."

A warning was issued to AS Rietumu Banka and Signet Bank AS, because, despite the fact that the banks had received a delayed refusal to cooperate from the audit firm with which they had a cooperation agreement, they urgently solved the situation, finding another audit firm and concluding contracts providing for the completion of the planned works within the statutory term. Those banks also timely published non-audited accounts, the audits have been completed, a violation has been prevented and the audited annual accounts have also been made public. Besides, the banks cooperated with the FCMC, providing a detailed explanation of the situation. 

A fine in the amount of EUR 4, 260 was imposed on AS BlueOrange Bank and AS LPB Bank, and a fine in the amount of EUR 4, 793 was imposed on AS Baltic International Bank. Even though the banks, similar to as referred to herein above, had received a delayed cooperation refusal from the audit firms, with which they had a cooperation agreement (in one instance the contract was concluded, but it was terminated), and the banks had solved the situation by finding another audit firm and concluding the contract, it was not done urgently enough in order to meet the statutory term. The banks, except for AS Baltic International Bank, have made their non-audited annual accounts public. All three banks have been cooperating with the FCMC, providing all information regarding the current developments. The banks continue working, in order to ensure the preparation of the audited annual accounts and making them public.

A fine in the amount of EUR 9, 585 was imposed on AS PrivatBank. This bank had not timely entered into negotiations with the auditors and had not reached an agreement. The bank, upon request of the FCMC, has made the non-audited annual accounts public. The audit is in progress and the audited accounts have not yet been made public. The bank has been cooperating with the FCMC, providing information regarding the current developments.

A fine in the amount of EUR 13, 490 was imposed on AS Meridian Trade Bank. The bank has recently entered into the contract and the audit is commenced. This is a repeated violation of such type, on 16 October 2018, the Board of the FCMC adopted the decision on imposition of the fine on the bank in the amount of EUR 14, 200 for the failure to submit and make the annual account for 2017 public. The bank has been cooperating with the FCMC, providing information updates regarding the situation with respect to the preparation of the audited annual account and making it public.

 

Further information:

Communications Division of the FCMC

phone: +371 67774807; +371 67774808

e-mail: ieva.upleja@fktk.lv, dace.jansone@fktk.lv 

 

More about the FCMC:

www.fktk.lv, www.klientuskola.lv, Twitter.com/FKTK_LV