UPDATE 1-Latvians drain ATMs, banks refute rumours

Sun Dec 11, 2011 5:59pm EST

* Rumours of Swedish banks' woes unfounded - authorities

* Some ATMs run out of cash, banks restocking

By Aleks Tapinsh and Simon Johnson

RIGA/STOCKHOLM, Dec 11 (Reuters) - Worried Latvians drained ATMs of cash on Sunday despite assurances from regulators and bankers that rumours about a problem with Swedbank and other Swedish banks operating in that Baltic nation were false.

Swedbank and SEB dominate banking in the country where medium size bank Krajbanka went bust earlier this month and which has a history of post-Soviet bank failures.

Swedbank and SEB both said they had seen increased withdrawals on Sunday after rumours spread on Twitter of problems at Swedish banks. People also reported getting phone calls from relatives and friends about rumours of bank problems.

"These are totally irrelevant rumours coming out of social media. The bank's position is more than solid," Swedbank spokesman Thomas Backteman, said. "The rumours are not only about us, but about Swedish banks."

Swedbank Latvia chief Maris Mancinskis wrote in a note to clients on the bank's Website that the rumours were "lies," but said activity had been heavier than usual for a Sunday evening. "If a cash machine becomes empty then it will be refilled within a couple of hours," he added.

SEB said that out of 234 ATMs, about 10-15 percent were without money at one point, but the bank continued to restock bank machines.

In many parts outside the Latvian capital Riga and other regional towns, long queues formed at cash machines, local media said. In Riga town centre the queues were short.

One man, standing in a queue at a Swedbank ATM in central Riga, said he had heard a report the bank was about to go bust. He declined to give his name. A woman, who also declined to be identified, said her son had called her and told her to get her money out of the bank, but that she didn't know anything more.

Latvia's financial services authority said the rumours were unfounded.

"A groundless wave of rumours has spread this weekend on Internet media and social Websites about the financial situation of Swedbank," Latvian regulator FKTK said in a statement.

"The Commission (FKTK) would like to inform the public that these are only rumours and there is no need for worry about the financial situation of the bank," it added.

The BNS news service quoted Security Police spokeswoman Kristine Apse-Krumina saying that the law enforcement authorities have been alerted to the rumors and increased cash withdrawals from ATMs.

"At this point, the rumors have no logical grounds," she said. Spreading false rumours about the banking system is a criminal offence.

Backteman said that at Swedbank - one of the best capitalised banks in Europe - withdrawals were running at about three times normal for a Sunday.

Swedbank had core capital of 13.35 percent of risk-weighted assets at the end of September, according to stress tests conducted by the European Banking Authority. It has set the minimum capital level for banks at 9 percent of risk-weighted assets.

Backteman said rumours of Swedish banks having problems had started about two weeks ago, and resurfaced on Friday.

He said Swedbank, which has has deposits of 1.6 billion lats ($3.10 billion) in Latvia, was monitoring the situation and was making sure customers were able to withdraw their money from the bank if they so wished.

The rumours come weeks after Latvijas Krajbanka collapsed following the takeover of its parent in Lithuania by the government, amid allegations of fraud against the former owners.

The collapse in 2008 of Latvia's second-biggest lender, Parex bank, forced the country to take a bailout from the International Monetary Fund and European Union.

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