Latvia's financial sector under scrutiny

Latvians are watching a financial crime scandal unfold in their own country. Not only has the head of the country's central bank been suspended from his post amidst allegations of corruption, Latvia's third-largest bank ABLV is also suspected of money laundering. Are these just two symptoms of a bigger crisis?

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Ria Nowosti (RU) /

The end of the dream of a Baltic Switzerland

Latvia became successful as a hub for shady deals - which is why the US and EU are taking action against it now, Ria Novosti comments:

“Our Latvian neighbours wanted to create a 'Baltic Switzerland'. ... But then it turned out that this option is not available for an American colony. ... Latvian banks have long had a reputation for 'resolving issues' quickly when it comes to 'grey' or 'black' transactions connected to money stemming from unknown or criminal sources or corruption. After ABLV's public - and highly successful - whipping this reputation has acquired a new element : yes, Latvia has a very customer-friendly and comparatively loyal banking system, but Latvian banks can be liquidated at any time and then customers will never see their money again.”

Äripäev (EE) /

A dark shadow over the Baltic states

The Latvian banking crisis casts a shadow over the entire Baltic region, laments the Estonian newspaper Äripäev:

“When [media group] Bloomberg asked in one of its titles on Monday afternoon why the transactions of a Baltic bank were being frozen because of its ties to North Korea, the damage to our banking system had already been done. ... We can't get along without Latvia. Whether we like it or not: corruption in our southern neighbour's state apparatus and bank scandals hurt us too. A Baltic bank's activities are frozen and all Estonia's banks are hit by frost too. ... Is it possible to market the Estonian or any of the other Baltic states' financial sectors on their own when everyone else sees us as part of the Baltic? Unfortunately not.”

Neatkarīgā (LV) /

The end of a conceited bank boss

Now the true face of the Central Bank's governor has come to light, Neatkarīgā notes:

“The Rimšēvičs affair illustrates how wrong public opinion can be. In the public's eyes the Central Bank boss was a guarantee for the country's financial stability. He was re-elected to his post practically without any discussion: the politicians in parliament didn't want to damage their reputations by opposing this popular figure. Despite the fact that the press has viewed Rimšēvičs with scepticism for years. It was pointed out that he had been too passive during various crises. ... Now, finally, the bank boss's PR bubble has burst. But this is hardly gratifying. Latvia's image has been damaged. We can only hope that this affair will teach us a lesson when it comes to assessing other conceited official figures in the future.”

Neue Zürcher Zeitung (CH) /

Dubious financial sector

Latvia's political leadership lacks the will to fight the corruption in the financial world, the Neue Zürcher Zeitung complains:

“The banking sector of this Baltic state has suffered from a dubious reputation for years. Two years ago Latvia only narrowly escaped the embarrassment of not being allowed to join the OECD because of shady banking transactions. The much hyped improvement doesn't seem to have materialised. ... Latvian politics is still dominated by old power structures and grey eminences today. An investigation into the activities of a handful of notorious oligarchs carried out in recent months uncovered evidence of the state being hijacked by particular interests. But it came to nothing. Or at least no charges were brought against anyone.”

Financial Times (GB) /

EU must not remain a toothless tiger

The financial crisis in Latvia shows how little scope for intervention Brussels has, the Financial Times criticises:

“The weakness of the EU enforcement regime is highlighted by the fact that it is the US, not the EU, that is taking action against ABLV. … The lack of central accountability for bad conduct in member state banking systems leaves the system as a whole at risk. A clear system through which the EU can act to impeach central bankers and enforce minimum conduct standards is needed before the dirty money infection grows worse.”