RIGA - A little known Russian bank has acquired a majority stake in Latvia's Multibanka, a small financial institution that encountered tremendous difficulties after falling under a U.S. probe into money laundering in 2005.
SMP Bank, a young financial institution founded seven years ago, has taken a majority interest in Multibanka, according to the Latvian Financial and Capital Markets Commission.
The deal was apparently under review for months, as the capital markets commission required additional time to check SMP Bank, which has entirely different accounting standards.
In the second half of 2006 Latvian media reported that SMP had purchased a 28 percent stake in Multibanka and planned to increase its share to 80 percent. Yet at the time the commission did not support the transaction.
Multibanka issued a press release saying that it would likely undergo a name change as a result of the acquisition and that in the future it would continue to offer a full range of financial services for its customers.
Teodors Tverijons, head of the Latvian Banking Association, said that SMP Bank would breathe new life into Multibanka, which has languished near the bottom of the list of Latvia's 24 banks.
"If the Russian bank purchased the controlling stock, shareholders must have plans of activating the bank's operations," he said, adding that Multibanka will now get its "second wind" in terms of both prestige and additional capital.
Multibanka was hit hard in 2005 when the U.S. Financial Department blacklisted it and one other bank on suspicions of money laundering.
From then on Multibanka was refused to work with dollar accounts by corresponding banks, which in turn forced its customers to look elsewhere for the service.
However, in July 2006 the Finance Department recalled the concern, thus allowed Multibanka to resume operations with U.S. dollar accounts.
SMP bank said it has had stable interests in the Baltic region for several years and its strategic plans include developing as a retail bank and providing services in various European Union member states.
In 2007 Multibanka posted earnings of 218,000 lats (311,000 euros), up more than six-fold from 2006. The bank's assets in late 2007 stood at 52 million lats, up 45.5 percent year-on-year.
Multibanka ranked 21st in terms of assets as of the end of January.