Snoras Bank nationalized

VILNIUS - On Nov. 16, the Lithuanian government decided to take over 100 percent of shares of Snoras Bank “for public needs,” said Finance Minister Ingrida Simonyte, i.e. the decision on temporary nationalization of Snoras was made to protect depositors’ interests. According to assets, Snoras was the fifth biggest bank in Lithuania and the biggest non-Scandinavian-owned bank in Lithuania.

Snoras had slightly less than a 10 percent share of Lithuania’s banking market.
It was the only Lithuania-based bank owned by a Russian businessman, as well as the only Lithuania-based bank dealing with Russian businesses and the only Lithuania-based bank having such a big amount of deposits from abroad – some 20 percent of deposits in Snoras belong to foreigners, mostly Russians, according to Loreta Grauziniene, chairwoman of the Lithuanian parliament’s committee on audit. Snoras was owned by London-based Russian businessman Vladimir Antonov, who owned 68 percent of Snoras’ shares, and Lithuanian Raimondas Baranauskas, who had 25 percent of Snoras’ shares and who was Snoras’ president and chairman of board.

On Nov. 17, Barnauskas, speaking from an unidentified country on the phone to LTV, described the Lithuanian government’s action as “robbery” and promised a legal fight. He also insisted that Snoras was facing no liquidity problems. On the same day, Prosecutor Darius Raulusaitis said that the investigation into possible financial wrongdoings in Snoras had started and the Prosecutor General’s Office will question Antonov and Baranauskas about Snoras’ activities. After the nationalization of Snoras, Antonov arrived in neighboring Latvia. Interestingly, two days before the nationalization, the magazine Veidas published its Lithuania-based annual bank ratings and Snoras was announced to be the second best Lithuanian bank after the Swedish-owned SEB.

According to EU laws, all the deposits in the bankrupt bank up to 100,000 euros should be compensated by the state in one month’s time. To avoid such a burden on the state budget, on Nov. 17 the Lithuanian parliament almost unanimously adopted the necessary laws allowing for the restructuring of Snoras into a ‘good bank’ with valuable assets and deposits up to 100,000 euros, and a ‘bad bank’ with loans, foreign government securities and other assets which are considered by the bank’s temporary administrator as ‘problematic.’

Vitas Vasiliauskas, the Lithuanian Central Bank’s board chairman, speaking at the parliament on Nov. 17, said that Brit Simon Freakley, who was appointed to be temporary administrator of Snoras, will receive a monthly salary of 140,000 euros from the now state-owned Snoras. Freakley, chief executive of Zolfo Cooper Europe, which is one of the world’s leading international providers of corporate advisory and restructuring services, has recent experience in bank restructuring in Iceland. He arrived in Vilnius with a large group of consultants.

Vasiliauskas told MPs that the Lithuanian central bank found 1 billion litas (290 million euros) of assets less than Snoras officially reported to the Vasiliauskas-led Bank of Lithuania. Earlier this year, Snoras announced that it found a new institutional investor – the alternative investment fund JFP Emerging Europe Momentum Fund, which is registered in Malta. However, the Lithuanian Central Bank was not in a hurry to agree to the bank assets’ official increase, by 380 million litas, due to investment from this fund. There were suspicions that the fund wanted to make such an investment with Snoras’ depositor money, which could be transferred to that fund via an offshore zone-related scheme, according to Vasiliauskas. Another reason for quick government action on Nov. 16 was possible liquidity problems. “Snoras’ reserves in the Bank of Lithuania on Tuesday morning were 250 million litas.

There were only 111 million litas left on Tuesday evening and only 44 million litas at midday of Wednesday,” Vasiliauskas said, explaining the reasons why the decision to take Snoras under government control was made on Wednesday, Nov. 16. There are 4 billion litas in the accounts of private individuals,
1.5 billion litas in the accounts of businesses and 500 million litas in the accounts of Lithuanian state institutions in Snoras.
Raimondas Kuodis, deputy chairman of the Lithuanian central bank’s board, told Ziniu Radijas on Nov. 17 that initially the takeover of Snoras was planned for the weekend to avoid an owner change-related disturbance on usual banking activity.
After 16:00 on Nov. 16, accounts were not accessible for bank customers, while from Nov. 17 they already could take up to 500 litas per day from their accounts. Kuodis said that it was necessary to act earlier than initially planned due to Tuesday’s front page news in the daily Lietuvos Rytas.

Lithuanian laws ban banks from owning media, but Snoras bought 35.64 percent of shares of Lithuania’s biggest daily Lietuvos Rytas via the bank’s subsidiary, Snoro Media Investicijos. On Nov. 15, Tuesday, Lietuvos Rytas published an anonymous article, which stated that Lithuanian President Dalia Grybauskaite plans an attack on banks which are not Scandinavian banks, i.e. banks owned by Lithuanians: Snoras, Ukio, Medicinos and Siauliu. Actually, Antonov is not a Lithuanian citizen, but Lietuvos Rytas avoided mentioning him. According to the daily, the intension of such an attack, based on the pretext of financial wrongdoings, would enable the government to create a state owned commercial bank (now, after the nationalization of Snoras, Lietuvos Rytas writes that Snoras was nationalized to please the interests of Snoras’ competitors, Scandinavian banks, and to attack the daily’s owners because the daily is constantly criticizing Grybauskaite).

The article in Lietuvos Rytas of Nov. 15 provoked the mass withdrawal of money from Snoras. Lithuanian officials rejected statements of the article in Lietuvos Rytas and they emphasized that there is a problem only with Snoras, while the rest of the Lithuanian banking sector is in good shape.
During the debates in parliament on Nov. 17, Petras Grazulis, MP of the Order and Justice Party’s parliamentary faction, and some other MPs called for creation of a strong Lithuanian state-owned commercial bank which could compete with the Scandinavians on the Lithuanian market. They pointed out that major banks and other main businesses are owned by state governments in Scandinavia. However, Finance Minister Ingrida Simonyte expressed her skepticism about such an idea. “I’m not a believer in state-owned business,” she said, adding that state control over Snoras is temporary and Snoras will be re-privatized as soon as it will be possible.

Simonyte also said those who had deposits of up to 100,000 euros can feel safe. Soon they will be able to do with their money whatever they want: to keep it in Snoras or withdraw it. Vasiliauskas said that the safety of 100,000 euros is guaranteed for everybody – for foreigners as well. “If a Lithuanian has a deposit in Iceland, he also has such guarantees,” Vasiliauskas said.
Together with the nationalization of Snoras Bank, the Lithuanian state became an unexpected shareholder of the Lietuvos Rytas daily, Lietuvos Rytas TV, the basketball club Vilnius Lietuvos Rytas, Latvian Krajbanka, the Lithuanian investment bank Finasta and even of the Druskininkai Snoras Snow Arena, which is a winter activities complex with three indoor skiing slopes and a snowboarding park that works all year round. More various treasures could be found: according to delfi.lt, luxurious real estate in Vilnius, Riga, Nice, and Kiev as well as Maybach, Spyker, Porsche Cayenne Turbo and Mercedes-Benz cars were registered in the name of Snoras or its subsidiaries.

According to Arunas Brazauskas, editor-in-chief of balsas.lt, the adventurous style of business by Antonov could cause a 1 billion litas hole in Snoras’ assets, which allowed the Lithuanian government to nationalize his bank. Speaking on LTV, Brazauskas even used the words “money laundering,” pointing to findings by Russia’s media about Antonov’s activity.
Snoras was probably under long-term surveillance of the secret services because, according to WikiLeaks, a UK company purchased some nuclear technologies from Germany for Iran via a Snoras Bank account held by that British company in 2004. Although the purchase was legal, it provoked some interest from U.S. officials.

“This precedent shows that any Lithuanian or foreign financial speculators and manipulators will not be able to act on the Lithuanian banking market,” President Grybauskaite said about the nationalization on Nov. 17.
On Nov. 18, Algirdas Semeta, the EU’s commissioner responsible for taxation, customs, audit and anti-fraud, visited his native Lithuania and spoke positively about the Lithuanian government’s swift action. However, he said that the Snoras problem can damage the Lithuanian economy. “According to the European Commission’s forecast for 2012, Lithuania with its 3.4 percent GDP growth should be the EU’s fastest growing member next year, but events related to the bank [Snoras] can change the situation because state aid for the bank can be needed,” Semeta said, adding that the European Commission is closely observing the Snoras situation because state aid issues are always under the supervision of the European Commission to avoid the distortion of competition on the market.