Temporary administrator of AB bankas SNORAS appointed, preventive temporary measures taken to ensure bank‘s asset protection
The Bank of Lithuania has announced that the Board of the Bank of Lithuania ruled out to appoint a temporary administrator of AB bankas SNORAS and apply temporary preventive measures to ensure protection of the bank‘s assets. The decision was taken to effectively protect the interests of the bank clients and public interests, to ensure the confidence in the domestic banking system and its stability. The enforcement measures provided for in the Law on Banks have been used after having evaluated the bank‘s financial situation, its activity in recent years, and the latest inspection results. In taking the decision, some changes in the bank these days were also taken into account.
The analysis of information compiled for supervisory purposes revealed a poor quality of the assets of AB bankas SNORAS, and that the evaluation of assumed risk was inappropriate due to the lack of responsibility. The bank ignored the instructions of the Bank of Lithuania to reduce operational risks or treated these instructions formally, which means no principal changes in the nature of its activities were made. AB bankas SNORAS avoided providing information needed for the supervisory purposes. There are some indications that the information submitted to the supervisory institution was false.
The decision regarding appointment of temporary administrator was taken after having evaluated the actions by the managers and owners of AB bankas SNORAS and making sure that other statutory measures would have not been enough to guarantee stable operations of the bank and protect property interests of its clients and the general public.
Temporary administrator Simon Freakley, Zolfo Cooper LLP, senior partner, has been appointed to take over the functions of AB bankas SNORAS’s Supervisory Council, its Board and heads of its Administration. The administrator has been given the task to perform additional analysis and evaluation of the bank‘s financial situation and possibilities for implementing effective measures to protect the interests of the bank‘s depositors, other creditors, and clients, as well as ensure the stability and reliability of the entire banking system. The temporary administrator will have to continuously inform the Bank of Lithuania on the ongoing administration process, and after the financial and activity audit is finished to carry out the restructuring in order to ensure the bank’s stable operations.
The bank operations which have been suspended after the appointment of temporary administrator will be renewed next Monday. After evaluating the bank’s financial situation the final decision is to be made regarding the necessity to temporarily apply statutory measures for the protection of the bank’s assets. All the deposits that fall under the deposit insurance scheme are safe, and depositors will have access to them after the restructuring of AB bankas Snoras is completed.
All the debtors’ obligations set in the agreements with the bank will remain in force. Loan payments and other obligations shall be made and honored further according to the timetable.
The Board of the Bank of Lithuania decided to submit to the Government a conclusion saying that the most effective solution of the bank’s problems later is the use by the Government of its right laid down in the Law on Financial Sustainability and take over the bank’s shares for public needs. The said measure, if implemented, can ensure maximum protection of depositors’ interests and minimize potential loss by the state.
The management of the Bank of Lithuania underlines that the present decision is related only to one special bank, AB bankas SNORAS, and its irresponsible behavior, and that the risk caused by this behavior has been contained by appointing the temporary administrator. The liquidity holdings of all the remaining foreign and local capital banks significantly exceed the ratio set by the Bank of Lithuania, and all the banks comply with the capital adequacy ratio. The changes regarding the activity of AB bankas SNORAS will have no direct impact on other banks operating in the country as the amount of interbank liabilities of the problem bank are limited.
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