Bloomberg News

Lithuania Seeks Missing Assets in Takeover of Snoras Bank

November 17, 2011

(Updates with bond yield in fifth paragraph, central bank in sixth, lawmakers’ vote in eighth, prosecutor’s comment in 17th.)

Nov. 17 (Bloomberg) -- Lithuania’s banking regulator said hundreds of millions of dollars in assets may be missing from Bankas Snoras AB after the government took over the Baltic nation’s fifth-biggest lender on concern it may be performing illegal operations.

More than 1 billion litai ($392 million) of assets may be unaccounted for, central bank Governor Vitas Vasiliauskas told reporters yesterday in the capital, Vilnius. Snoras’s operations were halted until Nov. 21 and a state administrator appointed after the lender ignored recommendations to reduce its credit risk, the regulator said in a statement.

The Baltic region is recovering from the worst recession in the European Union, during which Latvia sought an international bailout after rescuing Parex Banka AS to protect it against a run on deposits. With 19.4 billion litai in foreign-currency reserves, Lithuania can handle the takeover of Snoras, which has a 10 percent market share, according to AB DnB Bankas economist Jekaterina Rojaka.

“This isn’t a systemic problem for the banking sector,” Rojaka said yesterday in a telephone interview from Vilnius. Still, “the situation requires speedy and smooth action to contain panic and prevent a fall in government bonds.”

Lithuania’s 10-year dollar bond declined today, sending the yield up 0.12 percentage point to 6.39 percent, the highest since Oct. 13. The six-month interbank rate, or the Vilibor, increased 10 basis points to 2.23 percent, the highest since Aug. 13, 2010. The NASDAQ OMX Vilnius index fell 2.53 percent.

Limited Cash

Limited cash withdrawals of up to 500 litas per day were resumed at Snoras today, the central bank said in a statement.

“The bank does have liquidity,” temporary administrator Simon Freakley said in a press conference today. He refused to comment on the bank’s solvency.

Lawmakers are expected to vote on amendments to allow splitting Snoras into two banks with good and bad assets tomorrow. Lithuania needs to complete the process and stabilize the situation within a month and a half to limit takeover costs, Finance Minister Ingrida Simonyte told parliament today.

The plan will “not increase government borrowing needs or affect the budget deficit,” the Finance Ministry said in a separate statement.

Snoras is 68.1 percent-owned by Vladimir Antonov, a 36- year-old Russian who resides primarily in London and is the controlling shareholder of Portsmouth Football Club, with a 75 percent stake.

‘Moving Funds’

The central bank acted after Snoras “began moving funds to offshore accounts” this week, Prime Minister Andrius Kubilius said today in a radio interview with Ziniu Radijas. The bank reduced its reserves at the central bank from 250 million litai on Nov. 15 to 44 million litai the next day, which triggered the regulator’s reaction, Vasiliauskas told parliament.

The takeover “is the cheapest method to protect the Lithuanian banking system and prevent a bold attack against” it, President Dalia Grybauskaite told reporters today in Vilnius.

The government’s decision is a “robbery,” which will have “painful consequences for the country,” said Raimondas Baranauskas, the bank’s chairman and owner of a 25.31 percent stake, according to newspaper Lietuvos Rytas, which is 34 percent-owned by a Snoras subsidiary.

‘Substantial Effect’

The takeover won’t have “a substantial effect” on the economy because “this is a problem within one bank and it’s possible to solve the problem with minimal costs for taxpayers,” Simonyte told LNK television yesterday.

Kubilius said he doesn’t plan to ask the International Monetary Fund or other international lenders for financial help.

“I have no doubt Lithuania will manage” the situation without requiring aid from international institutions, Grybauskaite said.

Snoras, which competes with Scandinavian lenders including SEB AB, Swedbank AB and Nordea AB, also controls investment bank Finasta and Latvian lender Latvijas Krajbanka AS. Both banks operated on a regular basis today. It held 6.05 billion litai in deposits and had assets of 8.14 billion litai at the end of September, according to the Lithuanian Banking Association. The government guarantees bank deposits of up to 100,000 euros each.

“The decision was taken to effectively protect the interests of the bank’s clients and the public interest to ensure confidence in the domestic banking system and its stability,” the central bank said yesterday.

Foreign Assets

The Prosecutor General’s office started an investigation into Snoras’s operations and froze Lithuanian and foreign assets of some people involved, Darius Raulusaitis, deputy prosecutor general, said in a press conference today. Prosecutors “hope” Snoras’ shareholders and management will show up for questioning, he said. No indictments have yet been made, he added.

Snoras “ignored the instructions of the Bank of Lithuania to reduce operational risks” and made no changes to its business activities following advice from the central bank, the regulator said.

The lender also “avoided providing information needed for the supervisory purposes,” according to the central bank, which said “there are indications that information submitted to the supervisory institution was false.”

Antonov was barred from investing in Sweden’s Saab Automobile AB in July by the European Investment Bank, which didn’t give a reason for its decision.

‘Ongoing Pattern’

The U.K.’s Financial Services Authority denied Snoras permission to operate in Britain because the bank’s executives withheld information, calling the tactic “an ongoing pattern of behavior by institutions controlled by Mr. Antonov” in a February 2009 statement.

Phone calls by Bloomberg News to Antonov’s spokeswoman Natalja Olesik were not answered today.

Estonian residents had deposits of 7.8 million euros in Snoras, Estonian Financial Supervision Authority said in an e- mailed statement today. The deposits are guaranteed by the Lithuanian deposit guaranteeing program, it said.

“There are no exposures to the the Swedish banking system as far as we know, and if there are any, they are extremely marginal,” Swedish Financial Markets Minister Peter Norman told reporters in Stockholm.

--With assistance from Johan Carlstrom in Stockholm and Ott Ummelas in Tallinn. Editors: Andrew Langley, Balazs Penz, Louis Meixler.

To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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