Edzus Vejins, the central bank's spokesman, said the board would hand a claim to the Riga District Court to declare Lainbanka bankrupt.
The Bank of Latvia has been supervising Lainbanka since April 1998 because Lainbanka's share capital did not meet the capital adequacy requirement of 2 million lats ($ 3.5 million). On April 1, its share capital amounted to only 1.44 million lats.
In May, the Bank of Latvia allowed Lainbanka to perform cash and non-cash account settlements without removing the special supervision. But things were not getting better, and Lainbanka submitted its insolvency report to the central bank Jan. 19.
"Due to the circumstances that had developed in the bank after the banking crisis in 1995 and worsened significantly after the Russian crisis in 1998, Lainbanka's management does not see an opportunity to successfully continue the bank's operations without serious revitalization and subsequent restructuring," the bank said.
Lainbanka's management sees the last opportunity to save the bank in increasing the bank's capital or joining a bigger credit institution before the court hearing.
Vejins said Lainbanka's banking licence has not been revoked, and he expressed hope the bank will succeed in implementing its rehabilitation project.