The European Central Bank (ECB) has adopted today a decision to withdraw the authorisation of JSC “TRASTA KOMERCBANKA” (the Bank). The ECB decision was based on the proposal submitted to the ECB by the Financial and Capital Market Commission (FKTK) in view of the fact that the Bank had been committing serious and sustained breaches of regulatory requirements in several areas for a long period. Moreover, based on the assessment made by the FKTK in its capacity as Latvia’s national resolution authority*, a resolution action or a public bail-out of the Bank would not be in public interest.
Already in January 2016, the FKTK imposed restrictions on the Bank’s activities, resulting from a number of identified serious and sustained breaches of regulatory requirements by the Bank, existing for a long period. In particular, the Bank has been failing to comply with the regulatory capital requirements, while the Bank’s shareholders have not been able to address this non-compliance by increasing the Bank’s capital, thereby violating provisions of the Regulation (EU) No 575/2013 and of the Latvian Credit Institutions Law. Moreover, the FKTK ascertained that the Bank has been operating with losses for a long period and has no viable business model or development strategy adequate to the situation. In addition, serious and sustained breaches of the anti-money laundering and counter-terrorist financing regulations were identified in the Bank’s activities.
Based on such findings, the FKTK proposed to the ECB to withdraw the Bank’s authorisation as a credit institution. The ECB adopted a decision withdrawing the Bank’s authorisation on 3 March with the effect at 24:00 Latvian time on the same day.
Moreover, the FKTK in its capacity as the national resolution authority assessed whether resolution actions or bail-out is applicable to JSC “TRASTA KOMERCBANKA” as provided by the EU and national legislation, i.e. bail-out of a bank or its part shall be carried out only when it meets all the three conditions for resolution: a bank is encountering or likely to encounter financial difficulties; there is no reasonable prospect to prevent financial difficulties within reasonable timeframe by applying supervisory measures by FKTK or shareholders activities; resolution action is necessary in the public interest.
As a result the FKTK in its capacity of national resolution authority came to following conclusions:
– the Bank provides no critical functions, and is not a systemically important bank;
– in the case where the Bank quits the market, it will not have adverse effects on financial stability;
– in the case of winding-up the Bank and paying guaranteed compensation in the amount of up to EUR 100, 000 to eligible depositors, 93% of the Bank’s depositors will recover their deposits placed with the Bank in full, thereby the interests of majority of depositors are respected.
FKTK as the national resolution authority decided that resolution actions are not applicable to Bank.
A decision of the Board of FKTK on unavailability of deposits in the Bank will follow, as well as information on the procedure and timeframe for disbursement of guaranteed compensations: in case of unavailability of deposits in a bank, compensation of eligible deposits up to EUR 100,000 is guaranteed by the State.
* In Latvia, functions of national resolution authority are assigned to the FKTK where a particular unit, Resolution and Guarantee Funds Division, carries out resolution authority functions separately from supervisory functions.
FKTK Communications Division; Tel.: +371 67774807, +371 67774808, +371 67774860, +371 29476003