Latvia banking crisis: Riga points fingers at Russia

Bloomberg

The banking crisis engulfing the tiny nation of Latvia has turned into a potential diplomatic incident, as Riga points the finger at Moscow.
“There is a high probability that an externally organised widespread information operation is being carried out that, by its structure and execution, is identical to those observed in pre-election periods in the US, France and Germany,” Latvia’s Defense Ministry said in an emailed statement.
The Latvian accusation is the latest twist in a scandal that’s transfixed the European Union and NATO member nation of 2 million inhabitants that abuts Russia. A regional banking hub, Latvia has long faced questions over its enforcement of money-laundering rules, concerns that escalated when central bank Governor Ilmars Rimsevics was detained over the weekend by the country’s anti-corruption agency on suspicion of securing bribes.
While it didn’t explicitly name Russia, the ministry cited recent events, including the publication of a photograph that allegedly shows Rimsevics in Russia, as evidence of an attempt to damage the country’s image and erode public trust in the state before elections this October. The warning comes four days after US Special Counsel Robert Mueller accused 13 Russians of a sophisticated disinformation campaign that targeted the 2016 election and sought to sow discord in the US.
“They see the situation is hot and add more fuel to the fire,” said Ainars Latkovskis, a member of Latvia’s parliament, according to the LETA newswire. Russia is attempting to create chaos in Latvia by portraying it as a failed state in the eyes of the international community, he said.
The 52-year-old Rimsevics has led the central bank since 2001, making him the longest-serving head of a national bank on the European Central Bank’s Governing Council, which he joined in 2014 when Latvia adopted the euro.
Rimsevics, who was released on bail and hasn’t been formally charged, denied seeking bribes and accused lenders of conspiring against him. He resisted pressure from Latvian officials to resign from his post and told reporters in Riga that he’s “not guilty.” Kaspars Galkins, a spokesman for the Latvian Defense Ministry, declined to comment. Russian Foreign Ministry spokeswoman Maria Zakharova didn’t respond to a request for comment.
The probe coincides with separate bribery allegations against the central banker from Norvik Banka JSC, a Riga-based lender controlled by Grigory Guselnikov, a Russian-born UK citizen. Norvik detailed accusations in a 39-page complaint to a World Bank arbitration body. The document, obtained by Bloomberg News, referred to a “very high-level, senior Latvian public official” that Norvik Chief Executive Officer Oliver Bramwell said was Rimsevics.
The complaint, filed in December, also alleged that the Latvian banking regulator had retaliated against Norvik for the refusal to pay the bribes over a two-year period to
late 2017. The regulator denied those allegations.
The country’s Corruption Prevention and Combating Bureau, which detained Rimsevics, said its inquiry doesn’t relate to Norvik or any bank currently operating in the country.
The probe into the central bank chief is just one piece of the financial scandal in the former Soviet republic, which regained independence in 1991. Just last week, the US Treasury Department proposed to ban ABLV Bank SA, the third-largest lender, from the US financial system, saying it helped entities allegedly linked to North Korea’s missile program and institutionalized money-laundering as a “pillar” of its business.
The US has “full confidence” that Latvia will take the necessary steps to uphold the integrity of its banking and financial sector, State Department spokeswoman Heather Nauert said.
The latest allegations have put the government in a tight spot. While Prime Minister Maris Kucinskis has called for Rimsevics to step down, he also accused Norvik of seeking to undermine the integrity of the country’s financial system. Norvik hasn’t presented evidence of its allegations, Kucinskis told reporters.
Rimsevics, speaking at a press conference, accused a group of banks of working against him. Just hours after he declined to provide a loan from the central bank to ABLV on February 16, his office and house were searched by Latvian authorities, he said.

Latvian central bank chief Rimsevics fights all comers
Bloomberg

In his quarter century atop Latvia’s central bank, Ilmars Rimsevics has outlasted 19 governments and two currencies, emerging as much more than a guardian of price stability.
But he’s now fighting for his professional life, at the center of a widening drama that includes death threats, dark hints of Russian interference, accusations of North Korean money laundering and suggestions of score-settling among the tiny nation’s elite.
In a stunning fall from grace, Rimsevics was taken into custody, on suspicion of taking bribes. Released on bail 48 hours later, he then rebuffed appeals from the prime minister, finance minister and president to step aside. He said he was the victim of a conspiracy.
“I have taken the decision not to resign,” Rimsevics, who’s also a member of the European Central Bank’s Governing Council, told reporters in Riga on Tuesday. “I am not guilty.”
Since lawmakers first elected him governor in 2001 — he’s been re-elected twice — the central bank has consistently surpassed the government and parliament in opinion polls. And in a country that’s endured 13 prime ministers in a quarter century and the world’s deepest economic plunge after the 2008 collapse of Lehman Brothers, he was until this week one of just
a handful of officials to remain
unscathed.
“The public views him not so much as a state official but rather as an opinion leader,” Iveta Kazoka, an analyst at Providus public policy center in Riga, said by phone. He was “this fatherly type, on what’s wrong with economics and finances in Latvia, and what can be done to improve the situation.”
Indeed, he has spent most of his professional life rebuilding Latvia, which regained independence in 1991 following the collapse of the Soviet Union. The 52-year-old Riga-born engineering economist joined the central bank as deputy governor in 1992 after getting his MBA from Clarkson University in upstate New York.
He has jealously guarded his institution. In 2009, when the Latvian financial crisis wiped out a fifth of the economy and officials slashed public-sector salaries, he called into a live TV interview to confront then Prime Minister Valdis Dombrovskis.
When the premier said the central bank needed to cut its wages, Rimsevics reminded him the bank already had.
“There are not too many people in Latvia who would ever dare to contradict him,” Kazoka said.