Voluntary Liquidation of ABLV Bank

Riga, Latvia, 12 June, 2018, 19:00

Creditors’ claims are accepted starting from 18 June 2018 and will be accepted until 18 September 2018 (inclusive)

  • After all claims are lodged, it will take at least three months to carry out verification of claims and make a list of creditors.  
  • The disbursements for the depositors having balances over EUR 100,000 as at 23 February could be started in December 2018, starting from creditors of second order.  
  • Deposits under EUR 100 000 are already being disbursed. The service is ensured by Citadele banka since March 2018.  
  • It is estimated that by the end of 2020, about 95% of all deposits with the bank could be already disbursed.  
  • The procedure/sequence of disbursements to creditors is provided by the legislation: procedure explained here.  
  • Disbursements of the creditors’ moneys will be carefully analysed, inter alia by the auditing company and the FCMC.  

With the decision taken by the Financial and Capital Market Commission (FCMC) the largest credit institution’s liquidation procedure in the history of Latvia is officially approved — a bank having current assets amounting to EUR 2.4 billion is to be liquidated.

On 12 June 2018, the FCMC has already submitted a draft project on withdrawal of the bank’s license to the ECB. Within three days after the FCMC Council approves the decision of the shareholders of the bank on the voluntary liquidation process, the liquidators should submit an announcement about the liquidation of the bank in the official newspaper “Latvijas Vēstnesis” and at least to other newspapers, and this shall be deemed the start of the three-month period for lodging creditors’ claims.

Along with the approval of the voluntary liquidation, the members of the bank’s council and board lose their powers, and the operation will be taken over by the new executive body of the Bank – the Liquidation Committee, which will consist of the four liquidators approved by the Financial and Capital Market Commission. Two of the liquidators have the appropriate experience and expertise in finance and commerce, while other two are sworn attorneys: sworn attorneys Eva Berlaus and Elvijs Vēbers, real estate and finance expert Andris Kovaļčuks, and an expert in corporate finance Arvīds Kostomārovs. Liquidators will also be supported by independent experts and an international auditor Ernst&Young delegating experts from at least five countries.

“After 25 years of work put in building this company, it is hard to say these words, yet we are satisfied with the decision made. It is the best possible solution in this situation. Management of the bank will be in the hands of competent, professional and independent team of liquidators, who will do everything to satisfy claims of all creditors to 100%. We are glad that the process will take place under the supervision of the FCMC in collaboration with an international auditor”, says Ernests Bernis, now former Chairman of the Board of the bank.

As reported, the shareholders of the bank were forced to make a decision on voluntary liquidation in response to the decisions made by the European Central Bank (ECB) and the Single Resolution Board (SRB) on 23 February, when the ECB decided that ABLV and its subsidiary bank in Luxembourg is failing or likely to fail and therefore the banks are to be liquidated in accordance with local legislation. Taking into account the way the forced liquidation processes have taken place in Latvia by now, the shareholders of the bank decided to go through voluntary liquidation process.

On the liquidation process

The aim of the voluntary liquidation is to satisfy the claims and protect the interests of all creditors of the bank to 100%. Under this process, there will be various activities carried out in order to ensure that ABLV settles with all creditors in full.

ABLV Bank assumes that by the end of 2020, up to 95% of all deposits will already be disbursed, including the funds that have already been transferred for paying the compensations guaranteed by the law. The remaining amount of deposits, as well as other claims of the creditors, including claims about bonds and subordinated claims, it is planned to disburse under further course of the liquidation. In general, it is estimated that the liquidation process could take approximately five years.

Withdrawal of the bank’s license and the following steps under the liquidation

After the decision made by the FCMC, the European Central Bank will decide on withdrawing the bank’s license. Soon the clients will be invited to lodge their claims as creditors within three months. in order to lodge a claim, one should prove ones eligibility for it and its amount, as well as present updated identification documents and documents certifying the rights of representation.

Given the number of creditors, there will be about three months required after the end of term for lodging claims in order to review the claims, approve them and make a list of creditors. After the list of creditors is compiled, the disbursement of funds will continue starting from the so called creditors of second order. The disbursement of funds to the creditors of the first order, the ones having deposits up to EUR 100,000, has already been started in March 2018 through the Deposit Guarantee Fund.

Information for borrowers

Commencement of the voluntary liquidation does not affect the existing procedure of settlement of liabilities. One should continue settling one’s liabilities against the bank as it was done before. It is estimated that after the withdrawal of the bank’s license, one shall be required to make the payments for settlement of liabilities to another licensed credit institution. The clients will be informed about it individually soon.

On Financial Performance of ABLV as at 30 April 2018:

  • Liquidity ratio exceeds the minimum required level more than twice: liquidity ratio — 81.10% (minimum level is 30%), capital adequacy ratio — 24.69%, which is 2.5 times more than the required minimum of 11.5%.  
  • There is about EUR 1 billion cash held with the Bank of Latvia.  
  • The Bank’s profit in the first four months of 2017 amounted to EUR 3.7 million.  
  • As at 30 April 2018, the bank’s assets amounted to EUR 2.40 billion, while the deposits amounted to EUR 1.60 billion and the loan portfolio — EUR 828.3 million.  
  • The bank’s capital and reserves constitute EUR 351.7 million.  

ABLV Group

  • Before the February events, ABLV Group was employing more than 900 people. In ten years, the bank has paid more than EUR 145 million in taxes to Latvian budget. ABLV was the third largest bank in Latvia and the biggest private Bank with Latvian capital. Over the last years, the bank has been increasingly focusing on local market, including investment projects, management of pension capital and lending.  
  • The bank was one of the biggest lenders in Latvia, ensuring both mortgage loans to households and financing to enterprises, fostering development of a list of industries. Also, the bank was developing real estate projects, inter alia it was planned to attract up to EUR 1 billion of investments for the new business centre New Hanza by 2033.  
  • ABLV Capital Markets, IBAS, the subsidiary company of ABLV bank, was one of the largest brokerage service providers in Latvia, and by the end of 2017 the total assets of its clients invested in financial instruments were amounting to EUR 1.34 billion.  
  • ABLV Asset Management, IPAS was the largest mutual funds manager in Latvia with the volume of fund assets at 31 December 2017 exceeding EUR 130 million. ABLV Asset Management, IPAS had started operation also in pension capital management in Latvia.  
  • In eleven years of its existence, ABLV Charitable Foundation invested EUR 5 million in the development of Latvian society by supporting 350 projects in education, contemporary art, urban environment fields, as well as supporting families and children. The major shareholders of the bank were planning to co-finance the construction of the Latvian Museum of Contemporary Art without the state’s support and had already purchased a collection of more than 1200 pieces of art works.