Online bank Nemea under administration over ‘serious’ regulatory shortcomings

Online bank whose directors include former prime minister Lawrence Gonzi taken under administration after European Central Bank finds serious regulatory shortcomings

The online ‘direct’ bank Nemea Bank is to go under administration, in an instruction issued on recommendation by the European Central Bank.

The news was broken by MaltaToday in its Wednesday edition, and confirmed on Wednesday morning in an MFSA announcement at 7am.

The ECB found serious regulatory shortcomings, necessitating that the bank be taken under administration, although the banking sources said the concerns were unrelated to insolvency and that the bank is “healthy”.

The MFSA appointed PricewaterhouseCoopers Malta “as a competent person” in terms of the Banking Act to take charge of the bank’s assets, as well as stop deposits from customers and impose a cap on withdrawals of €250.

Creditinfo lists the bank’s directors as former prime minister Lawrence Gonzi and financier Joseph F.X. Zahra, recently appointed to head a special finance commission for the Vatican by Pope Francis.

The other directors are Finnish co-founders and co-chairmen Mika Lehto and Heikki Niemelä.

Nemea Bank PLC is in turn owned by Nemea PLC, itself owned by Nevestor SA of Belgium (40%) and Ninovan Ltd and Shilmore Ltd of Cyprus (30% each). The bank is ultimately jointly owned by its founders Heikki Niemelä and Mika Lehto.

“These measures are being taken with specific reference to the Bank following an on-site inspection at the bank carried out jointly with members of the DGMSIII of the European Central Bank and which was finalised in April 2016. As a result of this joint inspection a number of serious regulatory shortcomings have been identified and the authority has decided to take regulatory action to safeguard the interests of depositors and other creditors of the bank,” the MFSA said.

The MFSA said that as a response to the Bank’s situation, taking also the recommendation of the Supervisory Board of the ECB, it was necessary to appoint a competent person to takecharge of the assets of the bank for the purpose of safeguarding the interests of depositors and its other clients; and to assume control of the bank’s business and to carry on that business and such other functions as the MFSA may direct.

“These precautionary measures will remain in place until such time as the MFSA may direct otherwise.”

Direct bank

Nemea specialised in providing banking and investment services to individuals, businesses, institutions and high net worth individuals across the European economic area.

As a direct bank, Nemea Bank, which operates out of St Julian’s at the Portomaso tower, does not operate any physical bank branches but provides all its products and services online. The bank developed the Nemea Instant Payment (NIP) product, which enables real time global money transfers between Nemea clients at no cost.

Nemea Bank was founded on 2 September 2008, upon its licensing as an EU-regulated bank by the Malta Financial Services Authority (MFSA),

The Bank is a member of the Maltese Depositor Compensation Scheme, which protects client deposits up to €100,000 per client, and also a member of the Malta Investor Protection Scheme.

As an online-only bank Nemea could afford to operate with lower costs and overheads than traditional banks’ relative cost base, and earn income by generating interest, fees and commissions, and financial income. Clients’ deposits were invested by the bank in loans, deposits, other fixed income instruments and other low risk securities.