RIGA, Aug. 16 (Xinhua) -- The Latvian banking regulator, the Financial and Capital Market Commission (FCMC), is going to ask a court to declare Latvia's PNB Bank insolvent, the regulator's chairperson Kristine Cernaja-Mezmale said Friday.
"The bank's liabilities are currently bigger than its assets, so the bank is effectively insolvent. An insolvency claim will therefore be filed with a court," the head of the banking regulator said at a news conference.
Latvian Finance Minister Janis Reirs said on public radio that the sudden shutdown of PNB Bank won't cost the Baltic country's budget a single eurocent because the national deposit guarantee fund has enough money to pay out compensations to the bank's clients in the necessary amount.
The minister's comments came after the Latvian banking regulator announced Thursday that the operations of PNB Bank have been suspended following the European Central Bank's (ECB) decision to recognize the bank as a failing financial institution and the Singe Resolution Board's decision not to rescue the bank.
Reirs said in the radio interview that the bank's closure was unrelated to the recommendations provided to Latvia by the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval), but that it was an indication of an enhanced oversight and control of the Latvian banking sector.
The finance minister revealed that PNB Bank had proved unable to achieve sufficient capital adequacy and cope with tough competition in the banking sector.
Latvian Prime Minister Krisjanis Karins, meanwhile, asserted on Friday that the Latvian banking sector remained stable and will become even safer after PNB Bank's closure.
"The situation in the banking sector is stable. The decisions that have been taken are an indication of an effective and responsible oversight. The Latvian financial sector will become better structured and safer," the prime minister said.
In March 2019, the ECB decided to take PNB Bank under its direct supervision at the Latvian banking regulator's request in the light of an ongoing legal dispute between Latvia and PNB Bank, which was heard at the International Centre for Settlement of Investment Disputes (ICSID).
At the end of 2018, PNB ranked Latvia's seventh largest bank by assets.