Financial and Capital Market Commission of Latvia conducts an investigation on missing assets of Latvijas Krājbanka

Financial and Capital Market Commission of Latvia  has suspended all operations of Latvijas Krajbanka due to missing assets discovered during the  audit.

Latvijas Krajbanka, came under scrutiny last week after its controlling shareholder, Snoras Bank, was nationalized after regulators in Lithuania discovered that up to several hundred million dollars in assets were missing.

Latvia’s banking authority is planing to start the insolvency process of the  Latvijas Krājbanka as the  result of the decision of Lithuania regarding to the Snoras bank.

Latvijas Krajbanka was Latvia’s 10th largest bank by assets and 6th largest by deposits at the end of June, 2011, according to information provided by the Latvian Commercial Bank Association. Following the dates in the bank last year balance sheet the amount of the deposit is 600 millions lats.

Starting from November 23, 2011 bank clients can withdraw LVL 50 (EUR 72)  a day from the bank. Such procedure for repayment of guaranteed compensations is effective until 26.11.2011 midnight.

Small and medium-sized enterprises as well as large companies and state-owned companies that had deposited money in Latvijas Krajbanka will all be paid the state-guaranteed compensation of up to LVL 70,000 (EUR 100 000) each.

 In accordance with the Deposit Guarantee Law, the Deposit Guarantee Law guarantees compensations both to natural and legal persons for all kind of deposits in any currency in the amount that may not exceed EUR 100 000 (about LVL 70 000). The guaranteed compensation is calculated adding all deposits in each account together if several accounts opened in the Bank. The guaranteed compensation covers deposits and interest, account balance in the current account, salary account and savings account.

Following the Latvian legislation, the guaranteed compensation shall be paid within 20 working days as from date of occurrence of unavailability of deposits, and a period may be prolonged for the term up to 10 working days.

It is planed that money will be paid out by the bank “Citadele” starting from November 28, 2011.

In case on the insolvency the list of the property of the credit institution shall include deposits and interest on deposits, but shall not include other property belonging to third persons that is in the care of the credit institution and the state funded pensions, private pension funds, and insurance funds, if this condition is set in the  agreement, and motor vehicle third party liability insurance guarantee fund.

After the covering of the expenses of the insolvency proceedings or liquidation, the remaining funds shall be distributed, for the satisfaction of the principal sums (without interest) of the creditors’ claims, according to the following groups:

1) payments to depositors, who in accordance with the law are entitled to a guaranteed compensation;

2) claims of employees with respect to the salary for the last three months;

3) taxes and other payments (debts) to the State budget and the budgets of local governments;

4) such debts to creditors which have arisen from a credit institution accepting, but failing to fulfil, payment orders from a client regarding money transfer to accounts of the State or local government budgets;

5) State claims regarding repayment of credits guaranteed by the State;

6) the remaining legal claims of the creditors (principal sums without interest);

7) claims regarding interest payments to the creditors;

8) claims of such creditors who have submitted their claims after the specified time limit; and

9) claims regarding the funds which creditors have loaned to the credit institution for a definite time period, with the condition that they may be requested before the expiration of such time period only in the case of liquidation of the credit institution.

Valters Gencs

Attorney & Founding Partner

Gencs Valters Law Firm, Riga

T: +371 67 24 00 90

Email: valters.gencs@gencs.eu