A Lithuanian bank goes into receivership

12.02.2013, 15:50

Lithuania's central bank Bank of Lithuania today temporarily suspended the activity of Vilnius-listed Ukio bankas, one of the smallest banks in the country. reported news2biz LITHUANIA.

A temporary administrator was appointed to work out suggestions on how Ukio bankas can comply with its client obligations.

"The decision of the Board of the Bank of Lithuania to restrict the bank's operation was made after assessing the risky tendencies of Ukio bankas in recent years, actions of shareholders that were harmful to the bank, non-compliance with the instructions of the central bank's Supervision Service, and the consequent rising threat to the stable and reliable operation of the bank," BoL said in a statement.

According to BoL, Ukio did not form adequate provisions for problem loans, nor did it properly assess the other assets. This resulted in the declared net value of Ūkio bankas being higher than it actually is. Had the bank shown its true performance figures, "the bank wouldn't perform the prudential requirements related to the capital", BoL concludes, adding that as of 12 February Ukio bankas no longer complies with the liquidity ratio.

Loans issued to companies associated with Ukio bankas' majority owner, flamboyant Russian-born businessman Vladimir Romanov, make up the largest part of the problem loan portfolio, BoL said.

For January-September 2012, Ukio reported an unaudited net loss of LTL 44m. As of Q3 2012, the bank had a 7% share of the corporate loan portfolio, whereas the share of private loans was merely 0.4%. On the other hand, Ukio's share in private deposits amounted to 10% due to the bank's unreasonably high interest rates.

As of the end of September, Ukio's assets stood at LTL 4.1bn, 6th biggest in the country's banking sector. In terms of market share, this constituted only 5%.

Ukio suspension follows the nationalisation and subsequent bankruptcy of Snoras, a much bigger Russian-controlled bank that wiped Lithuania's deposit insurance fund clean.