Snoras Takeover, Finances ‘More Complicated’ Than Thought
Lithuanian Prime Minister Andrius Kubilius said the situation at Bankas Snoras AB (SRS1L), which was taken over by the government last week, is “more complicated than initially thought.”
The bank’s assets may be lower than previously believed and some loans weren’t “sufficiently” provisioned, Vaidievutis Geralavicius, a central bank board member, told a news conference today. The central bank will have more information about the takeover of Snoras and a probe into its finances on Nov. 23, Kubilius told journalists earlier today.
The government seized Snoras on Nov. 16 after the central bank discovered that about 300 million euros ($405 million) of assets may be missing and the lender was at risk of insolvency. Some securities reported as assets by the bank don’t exist, the regulator said. The Prosecutor General opened an investigation into possible fraud and embezzlement.
“An investigation will show how responsible a commercial bank it was and how much of it was a vehicle for shady financial dealings,” Kubilius said.
Lithuania’s 10-year dollar bond fell, sending the yield up 0.21 percentage point to 6.63 percent, the highest since Oct. 11.
Lawmakers approved legislation on Nov. 17 allowing the government to split Snoras into two banks, with good and bad assets. The bad bank is planned to file for protection from creditors, while the government will seek an investor for the good bank with healthy assets and insured deposits “as soon as possible,” the Finance Ministry said on Nov. 18.
“The actions taken” taken by the government “radically differ from the methods and generally accepted rules of civilized business practices in democratic countries, and from the norms of a market economy,” shareholders Vladimir Antonov and Raimondas Baranauskas said in a joint statement sent by e- mail.
Shareholders “are extremely concerned with the current situation,” which “will inevitably lead to the further deterioration of the economy and finances of Lithuania, and will also cause major harm to its international reputation and image in political circles and within the global economy,” Antonov and Baranauskas said in the statement.
No public money will be required to save Snoras because the bank has sufficient assets to cover insured deposits, the ministry said. Uninsured liabilities such as bonds will receive “a substantial haircut,” it added.
Insured liabilities account for 1.4 billion euros, compared with a total of 2.36 billion euros in assets at the end of September, it said.
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