3 Min Read
* Ukio Bankas No. 4 by deposits, No. 6 by assets
* Main shareholder Romanov owns ailing Scottish soccer club
* Central bank takes tough stance on banks
* Bank system dominated by subdiaries of Scandinavian banks
VILNIUS, Feb 12 (Reuters) - Lithuania's central bank froze the operations of the country's No. 4 bank Ukio Bankas on Tuesday, deepening the woes of main shareholder Vladimir Romanov, owner of cash-strapped Scottish soccer club Hearts.
The central bank has said it aims to make sure the banking system, victim of several post-Soviet crises, is as sound as possible and in late 2011 closed down another bank, Snoras.
This time, it said in a statement, it had found too much risk taking and not enough effort to provide financial certainty at Ukio, which is controlled by Romanov.
The prosecutor's office also said in a statement on Tuesday that it had opened an investigation into the possible embezzlement of assets at the bank.
"Deficiencies in the bank's operation and violations of legal acts have been established more than once," the central bank said in its statement, appointing a temporary administrator to run the bank while it decided on the bank's future.
It said it would negotiate with other banks to try to restructure Ukio. Siauliu Bank, almost 20 percent owned by the European Bank for Reconstruction and Development, said it would take part in the talks.
Romanov was quoted by local media as denying he was not prepared to put funds into the bank. "That is nonsense. I took all responsibility on myself ... I did everything they asked for," news portal Delfi quoted him as saying.
Lithuania has been quick in the past to honour deposit guarantees, and on the streets of capital city Vilnius there were no crowds or protests at Ukio branches, which were all shut.
Ukio, whose shares have slid 75 percent since the start of 2011, has been under the eye of the central bank and was the object of a central bank inspection in December and January.
Romanov last week also sought help from the council of his home town, Kaunas, for a well-known local basketball club.
Ukio in January rejected media allegations it was under investigation for helping launder the proceeds of a Russian corruption case.
Edinburgh-based Hearts, one of Scotland's top soccer clubs, has debt of about 24 million pounds ($38 million) and in December agreed to pay 1.5 million pounds to settle a tax dispute. Hearts also cleared a separate tax bill of 450,000 pounds which lifted the immediate threat of liquidation.
Fans have set up a foundation to try and save the club and have asked Romanov to let them take it over.
The central bank said Ukio had deposits of 3.4 billion litas, making it the fourth biggest deposit taker after the local subdiaries of Scandinavian groups SEB, Swedbank and DNB. By assets, Ukio is sixth largest.