Europe to Wind Down Latvian Bank Targeted by U.S. Over Sanctions

European authorities moved to liquidate ABLV Bank AS after clients pulled assets from the lender following U.S. accusations that it laundered money.

The European Central Bank, which had already placed a freeze on payments by the lender, said early Saturday in Frankfurt that ABLV was failing or likely to fail, handing it over to Europe’s Single Resolution Board. That authority said a resolution of the bank and its Luxembourg-based subsidiary isn’t in the public interest.

ABLV was plunged into crisis after the U.S. Treasury Department this month proposed to ban it from the American financial system, saying it helped process illicit transactions, including for entities with alleged ties to North Korea’s ballistic missile program. The bank responded by saying the allegations are wrong and misleading and that it’s working to provide information to the Treasury that would help to overturn the proposal.

Latvia’s central bank late Friday tripled emergency liquidity assistance to ABLV after input from the ECB and local regulators. The ECB previously asked Latvia’s Financial and Capital Markets Commission to impose a moratorium on ABLV, which meant the bank was barred from making payments on financial liabilities including deposits and bonds until further notice. The measure, a first for the ECB, was necessary to stabilize outflows after a “significant deterioration of bank’s financial position.”

“The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said in a statement. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian deposit guarantee fund starts.”

ABLV and a subsidiary will be wound down under Latvian and Luxembourg law, meaning eligible deposits are protected up to 100,000 euros ($123,000), the SRB said in a statement early Saturday from Brussels.

The bank said its liquidation may be started "in the nearest future" and that "the amount of its assets is sufficient to satisfy demands of all clients and creditors."

ABLV saw 600 million euros of deposits and securities withdrawn after the U.S. Treasury announcement, according to Peters Putnins, head of Latvia’s financial watchdog. The bank meets liquidity and capital adequacy ratios set by the Latvian regulator, Ernests Bernis, the bank’s chief executive officer, has told reporters.

Chairman Olegs Fils, Bernis and his wife Nika Berne directly and indirectly held about 87 percent of ABLV voting shares as of Nov. 1. The heads of the bank’s divisions, employees, customers and business partners also own shares, according to its website.

With a 3.63 billion-euro balance sheet at the end of September, ABLV is comparatively small by international standards. It has been directly supervised by the ECB since late 2014 because it is one of Latvia’s three biggest banks by assets.