Business World

Sunday 16 December 2018

Central bank chief should step down - Latvian PM

ECB governing council member and Latvian central bank head Ilmars Rimsevics
ECB governing council member and Latvian central bank head Ilmars Rimsevics

Erich Zann

The head of Latvia's central bank, who's also a member of the board of the European Central Bank responsible for monetary policy and financial regulation in Ireland, is under pressure to stand down after he was detained by an anti-corruption task force.

Yesterday the European Central Bank (ECB) stopped all payments by ABLV Bank, Latvia's third biggest lender, saying its liquidity position has deteriorated after accusations by US authorities of breaching sanctions against North Korea. US authorities have accused the bank of "institutionalised money laundering".

Latvia's prime minister called on the head of the country's central bank to stand aside as the state's own anti-corruption office pursued an investigation against the central bank governor.

The unprecedented detention of ECB governing council member and Latvian central bank head Ilmars Rimsevics by the Latvian anti-graft bureau sent shock waves through Europe's regulators at the weekend.

Officials including Prime Minister Maris Kucinskis and Finance Minister Dana Reizniece-Ozola called on Mr Rimsevics, 52, to recuse himself from his duties, but didn't link the detention to the US investigation of ABLV.

"I can't imagine that the Bank of Latvia president, who was detained under very serious accusations, could work," Kucinskis told Latvian TV in an interview on Monday. A lawyer for Mr Rimsevics said the governor considers his detention "clearly illegal" and said they were preparing a complaint.

Meanwhile, ABLV Bank was blocked from making payments following an intervention from the ECB.

"This means that temporarily, and until further notice, a prohibition of all payments by ABLV Bank on its financial liabilities has been imposed, and is now in effect," the ECB said. "In recent days, there has been a sharp deterioration of the bank's financial position."

The US Treasury sought sanctions against the bank last week, accusing it of allowing clients to conduct business with North Korea in violation of United Nations sanctions that were imposed in relation to its nuclear weapons program.

"Illicit financial activity at the bank has included transactions for parties connected to US and UN-designated entities, some of which are involved in North Korea's procurement or export of ballistic missiles," the Financial Crimes Enforcement Network, a bureau of the US Treasury said.

"ABLV has institutionalised money laundering as a pillar of the bank's business practices," it said, adding that bank executives and management have used bribery to influence Latvian officials.

ABLV, which did not comment on the US accusation on Monday, said it has sought funding from the Latvian Central Bank to stabilise its finances and had ample collateral.

In order to stabilise the situation in ABLV, the commercial bank has decided to mortgage part of it securities in exchange of asking €480m loan from the Bank of Latvia," ABLV Bank's spokesman told Latvian news agency LETA.

Last week, the bank said the US accusations were based on unfounded and misleading information.

Irish Independent

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