Europe to wind down Latvian Bank targeted by US over sanctions

European authorities will close ABLV Bank AS, the Latvian lender facing U.S. accusations of money laundering tied to North Korea that’s central to the political scandal shaking the euro zone this week.

The European Central Bank initiated the radical step to stem the turmoil engulfing one of the currency area’s smallest members, saying Latvia’s third-largest lender was failing or likely to fail. It followed an ECB freeze on ABLV payments after the allegations triggered an exodus of deposits. Latvia’s representative on the ECB Governing Council also was detained a week ago amid bribery allegations.

Despite ABLV saying it raised more than 1.36 billion euros ($1.67 billion) over four business days, the ECB said it lacked adequate cash liquidity and referred the lender to Europe’s Single Resolution Board. The SRB deemed the bank non-critical for financial stability and said restructuring wasn’t in the public interest, making the bank the fourth victim of the ECB death penalty. ABLV, which has denied the U.S. money-laundering accusations, said the closure is a political move. “The bank is likely unable to pay its debts or other liabilities as they fall due,” the ECB said in a statement on Saturday in Frankfurt. “The bank did not have sufficient funds which are immediately available to withstand stressed outflows of deposits before the payout procedure of the Latvian depositguarantee fund starts.” The ECB also decided to prohibit the bank from accepting new depositors or increasing the amounts of existing depositors, a spokesman for the central bank said on Saturday.