Nov. 25 (Bloomberg) -- Bankas Snoras AB, Lithuania’s fifth- biggest bank by assets, is insolvent and will file for court protection from creditors to avoid a costly bailout for taxpayers, the central bank said.
The bank’s financial situation is “worse than previously identified” and saving the bank “would cost significantly more and would take longer than the available liquidity” at Snoras, the central bank said in a statement. Some 3.4 billion litai ($1.3 billion) in assets are missing, Governor Vitas Vasiliauskas added at a news conference yesterday.
“There’s no sense in putting money into a plane that’s not going to fly,” Vasiliauskas said. “We don’t see any other healthy way on how to resolve the problem other than by liquidating the bank. We have stumbled into potentially illegal activity.”
The government took over Snoras on Nov. 16 after the central bank discovered that assets reported on the bank’s balance sheet were missing. Former shareholders Vladimir Antonov and Raimondas Baranauskas were detained in London yesterday after Lithuanian prosecutors issued an arrest warrant on suspicion of fraud and embezzlement.
Splitting the Bank
Lithuanian lawmakers approved legislation on Nov. 17 allowing the state to split Snoras into two parts, with good and bad assets. The bad bank will be the entity 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 Nov. 18.
Fitch Ratings on Nov. 21 cut the lender’s credit grade to C from B+ because the state takeover involves losses for creditors. Snoras’s liabilities are substantially higher than its assets, the central bank said yesterday.
Lithuania won’t require international aid to deal with the situation at Snoras, Finance Minister Ingrida Simonyte said at a conference in Vilnius yesterday.
Snoras’s Latvian subsidiary Latvijas Krajbanka AS, the country’s sixth-biggest deposit bank, said 100 million lati ($190.7 million) was also missing. Krajbanka is also likely to be liquidated, Simonyte said.
--Editors: Zoe Schneeweiss, Alan Crosby
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