Swedbank Says Coping With Mass Latvian Withdrawals

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Swedbank said on Monday it would cope easily with a weekend mass withdrawal of cash in Latvia triggered by rumours of problems at Swedish banks.

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Latvian security police said they were launching a criminal investigation into spreading false news about the financial system.

The Swedish bank said about 20 million lats ($38 million) was drained from Latvian cash machines, about half of which ran out of money.

"These (withdrawals) won't impact our work in any way," Swedbank Latvia chief Marcis Mancinskis told LNT commercial television, calling the rumours "absolutely absurd".

The rumours were spread rapidly by word of mouth and text messages then hit social networking site Twitter.

Swedbank shares were down 2.1 percent by 1251 GMT while SEB shares were 1.6 percent weaker. The wider Stockholm bourse was down 0.5 percent.

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The jitters sent up the cost of insuring Latvian five-year debt to 375 basis points from 350.

Swedbank is the biggest bank in Latvia and the other two Baltic states of Lithuania and Estonia, followed by SEB . People pulled money from both banks after rumours of problems at Swedish banks spread.

"This is insignificant...in relation to our liquidity position," Swedbank head of corporate affairs Thomas Backteman said in Stockholm.

The total liquidity situation at the end of September was 280 billion crowns ($41.54 billion) out of which 100 billion crowns was cash for the whole bank.

He said things seemed to be calming down.

"We are working hard on making sure that we put new cash into the machines. This will take a couple of days," he said.

SEB was also affected. "What we've seen is unusually large withdrawals from the ATMs following these rumours about the Swedish banks," said spokeswoman Elisabeth Lennhede.

She said the bank's deposits at the Swedish central bank were 12 times the size of the total Latvian deposit base.

POLICE PROBE

The number of withdrawals began to increase by mid-afternoon on Sunday and lasted well into the evening.

On Monday, small queues could still be seen in the centre of capital Riga, though Mancinskis said most money was taken out in the western port town of Ventspils and another region.

Spreading false rumours that threaten the stability of the banking system is a criminal offence which carries up to two years of imprisonment for the first offence.

An economics lecturer from Ventspils was detained in 2008 during the banking crisis on suspicion of spreading rumours about a devaluation of the lat after he argued in a public discussion against keeping money in banks and in lats

Latvia, a country of 2.2 million people, has a history of post-Soviet bank failures, the latest being only this month when a mid-sized bank was put into liquidation after its Lithuanian parent was seized by the state.

In 2008, Latvia had to rescue its second-largest bank, Parex, which was owned by two local businessmen. ($1 = 0.5223 Latvian lats) ($1 = 6.7411 Swedish crowns)