The Bank of Lithuania revoked the licence of AB bankas SNORAS and will apply to court regarding bankruptcy
The Board of the Bank of Lithuania recognised AB bankas SNORAS as insolvent and will apply to the Vilnius District Court regarding the initiation of the bankruptcy case. Due to the initiation of the bankruptcy case, the licence issued to the bank by the Bank of Lithuania shall be permanently revoked.
The Board of the Bank of Lithuania took the decision after analysing and assessing the conclusion and proposals regarding the prospects the bank’s further operation presented by AB bankas SNORAS temporary administrator.
The analysis performed by the temporary administrator of AB bankas SNORAS revealed that the bank’s financial situation is significantly worse than identified, when the Board of the Bank of Lithuania took the decision on 16 November 2011 to appoint a temporary administrator to AB bankas SNORAS and to apply temporary preventive measures for the protection of the bank’s assets.
According to the conclusion submitted by the administrator and interim financial statements of AB bankas SNORAS, this bank’s net worth is significantly lower than the bank’s liabilities, therefore the bank is insolvent.
The Board thoroughly analysed the potential options for restoring the bank’s operation presented by the temporary administrator: the state’s financial injection to restore the current bank’s capital and operation, the assignment of the bank’s assets and liabilities to another already operating or state-established bank, which is envisaged by Article 761 of the Law on Banks, splitting the bank to create a possibility to protect the interests of uninsured creditors.
The comparative analysis of the bank restructuring options presented by the administrator revealed that the risk of subsequent failure of any newly created entity was too significant – there are no sufficient preconditions for a prompt restoration of profitable operation and large losses related to legal disputes are likely. Such risky bank rescue operations would cost taxpayers significantly more and would last much longer than the liquidation of AB bankas SNORAS.
Earlier Board resolutions, which allowed certain operations, were revoked.
After the entry into effect of the Resolution of the Board of the Bank of Lithuania, the deposit insurance mechanism starts operating. Deposits shall be compensated in accordance with the conditions established by the Republic of Lithuania Law on Insurance of Deposits and Liabilities to Investors – the insured amount for natural persons and legal entities is up to LTL 345,280. The Law also stipulates that deposits should be compensated in 20 business days. Deposit insurance enterprise may extend this term by 10 business days.