EU judges are to rule on Latvia’s handling of a bribery fiasco in a test case for eurozone banking supervision.
The European Central Bank (ECB) filed the case at the EU court in Luxembourg on Friday (6 April) after Latvia banned its own central bank chief, Ilmars Rimsevics, from office on bribery allegations last month.
The move is to see the ECB’s 25-member governing council meet with an empty chair in Frankfurt in April, but the EU central bank is seeking an injunction to overrule the ban in order to “preserve the normal functioning of its decision-making”.
The ECB also asked the EU judges to rule “whether Latvian authorities breached European Union law” in prohibiting Rimsevics from “holding office at the Latvian central bank and exercising his functions as a member of the ECB’s governing Council”.
Latvian authorities accused Rimsevics of taking up to €100,000 in bribes while in office and while attending ECB meetings in Frankfurt.
He denies the allegations and plans to contest his dismissal in the courts.
The ECB brought the case in order to protect its legal independence from national politics in the 19 eurozone states, but the affair cast a harsh spotlight on EU anti-corruption structures.
The empty chair fiasco came after two other eurozone banking scandals – the forced liquidation of ABLV, Latvia’s third largest lender, and Malta’s suspension of Pilates Bank.
The US said in March that ABLV, which Rimsevics was supposed to oversee, was guilty of “institutionalised money laundering” to help North Korea evade sanctions.
The US also accused Pilates Bank of sanctions busting on Iran, amid broader allegations of corruption by the Maltese government and the assassination of an investigative journalist on the island.
The US announcement on ABLV prompted a bank run. The ECB intervened with liquidity assistance to prevent the bank’s collapse, but pulled the plug after 10 days, forcing its liquidation.
The EU central bank later admitted that its own supervisory structure, the Single Supervisory Mechanism (SSM), had failed to tackle the problem.
The SSM scrutinises business models and governance of eurozone banks, but the EU and the eurozone have no centralised anti-money laundering body, the SSM noted.
“I agree with you it’s very embarrassing to depend on the US authorities to do the job,” Daniele Nouy, the SSB chairman, told the European Parliament at the time.
“This has to change,” she told MEPs at a hearing on 26 March.