DNB : ABLV liquidation a 'credit negative' for similar Latvian banks - Moody's

STOCKHOLM (Reuters) - The decision by the European Central Bank to wind up ABLV, Latvia's third biggest bank by assets, is negative for other Latvian banks that are similarly funded, like Rietumu Banka and Norvik Bank, credit rating institute Moody's said in a report.

ABLV, a private-held bank whose customers are mostly residents of the Commonwealth of Independent States (CIS), was accused by U.S. authorities of large-scale money laundering earlier this month. That led to the bank facing a liquidity squeeze and the ECB's decision this weekend to shut it down.

ABLV denies the accusations.

"The development was the latest in a series of events that are credit negative for Latvian banks' international reputation and undermine Latvian authorities' efforts to promote the country as a financial hub," Moody's said in a research note on Monday.

Most domestic lending in Latvia is conducted by Nordic banks such as Sweden's SEB and Swedbank. Many of Latvia's other banks are funded mainly from deposits by non-residents and have only limited domestic lending operations.

"Although the developments are credit negative for all banks, those that rely more heavily on non-resident deposits to fund their operations are the most vulnerable, including ABLV, Rietumu Banka, and Norvik Bank," Moody's said.

In a separate development, Latvia's central bank head Ilmars Rimsevics has been urged to step down following graft allegations. Rimsevics denies wrongdoing.

(Reporting by Johan Ahlander)

Stocks treated in this article : DNB, Nordea Bank, Skandinaviska Enskilda Banken, Swedbank