The Baltic International Bank (BIB) was closed by the regulator about a year ago, but it appeared the bank has less money than accounted for and it cannot settle with all creditors, Latvian Television's De Facto Programme reported.
The report-based article was also published by eng.lsm.lv, the website of Latvian national broadcaster LSM, reported on January 15.
BIB closed in December 2022 and began winding up proceedings. Lawyer Olavs Cers was appointed as liquidator, who has now concluded that there was too big of a hole in the bank's safe deposit to pay off all debts.
The bank's liquidation plan prepared late last year, according to De Facto, shows that the bank's assets were worth almost €138.7mn at the end of 2022. At the time of commencement of liquidation last spring, assets decreased to €104.2mn, while in autumn after the revaluation of major real estate and cancellation of various liabilities, assets were worth only €76.3mn – half of the initial estimate.
Several bank-owned buildings and securities worth €20mn have been arrested as a result of a Police investigation. In other criminal proceedings, the bank's clients' financial resources worth €15.4mn have been impounded.
Four of the five largest bank loans issued in Spain, Bulgaria, Ukraine and Russia do not make a profit. But a much more tangible minus comes from properties owned directly by the bank itself – it is estimated they may have lost €21.9mn in value.
Given that the available funds in the bank turned out to be less than expected, the liquidator called on those who owe the bank to refuse some of the money. However, by the deadline set late last year, the necessary response was not achieved. Creditors were not prepared to voluntarily forgo at least €39mn. Therefore the bank faces insolvency.
Cers, the bank's liquidator, declined an interview, instead commenting on the website of his law firm. “The total amount of assets seized and the significant difference between asset balance sheet and market values underpin the conclusion that the assets of the credit institution are not sufficient to fully satisfy the claims of all creditors in liquidation proceedings,” Cers wrote.
BIB is not the first bank to turn out to have less money after closing than was reflected in the accounts. Again, this situation raises doubts as to whether banks' assets have been properly valued in Latvia.
“At this time, these assets have been revalued by the liquidator in the context of non-continuation. Of course, looking also from today's circumstances, when the real estate market is on a declining trend, it can be seen that the market values of its real estate properties are significantly different from those originally taken for operating purposes,” said Santa Purgaile, Deputy President of the Latvian central bank (Bank of Latvia).
A year ago, as President of the Financial and Capital Market Commission, Purgaile considered BIB's assets to be sufficiently valued, which has now proved to be an erroneous estimate.
Last year, the Parliamentary Inquiry Committee was set up in the Saeima, the Latvian Parliament, one of the tasks of which was to deal with the circumstances of BIB closure. In a letter to the Committee, the Prosecutor General's Office revealed in early 2023 that the investigation was into money laundering on a large scale, using accounts and investing financial resources in the bank's share capital. However, in order not to influence criminal matters, the Saeima Committee did not evaluate specific banks at all, eng.lsm.lv and De Facto said.
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