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Nemea banking licence to be withdrawn over regulatory concerns

MFSA says it will ask European Central Bank to withdraw banking licence to online-only bank Nemea, leaving depositors unable to withdraw monies

matthew_vella
Matthew Vella
20 January 2017, 6:48pm
The Malta Financial Services Authority has decided to ask the European Central Bank to withdraw the banking licence granted to Nemea Bank, an online-only bank which was placed under controllership earlier in 2016.

The bank was placed under the control of PricewaterhouseCoopers as a ‘competent person’ in April 2016 to ensure the proper protection of depositors and bank’s clients after the ECB flagged “serious regulatory concerns” inside the bank.

The MFSA said that discussions were being conducted with the bank’s shareholders to ensure the necessary action to address regulatory shortcomings, but said that “despite repeated requests”, to date no tangible progress had been registered to fulfil these regulatory requirements.

“Given that this situation cannot be sustained indefinitely without undue detriment to depositors, the Authority has now decided to propose to the ECB the withdrawal of the licence granted to the Bank. This measure has been taken by the Authority in the interests of the depositors of the Bank,” the MFSA said.

Pending the ECB’s final decision on the license withdrawal, a prohibition of the withdrawal of deposits has been put in place with immediate effect as a precautionary measure to safeguard the assets of the Bank and to ensure the equal treatment of depositors. In addition the Competent Person will remain in place until further notice.

The MFSA also said Nemea's capital position was positive but below the regulatory requirement. 

Pending the ECB decision regarding the withdrawal of the bank’s license, depositors will not be able to withdraw funds or make any payments or affect any direct debits and standing orders from their accounts.

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

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.

After the MFSA placed Nemea under administration it also stopped deposits from customers and imposed a cap on withdrawals of €250, later increased to €2,500.

Nemea Bank owners The bank’s co-chairmen Heikki Niemelä and Mika Lehto
Nemea Bank owners The bank’s co-chairmen Heikki Niemelä and Mika Lehto
The bank’s directors include 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.

Nemea Bank posted a €214,000 pre-tax profit in the three-month period ended 31 March 2016, on income of €865,000. The bank has €68 million in assets, composed mainly of €30 million in loans and advances to customers and €22million in loans and advances to banks.
According to unaudited financial position in March 2016, the bank owed €61 million to customers.

In 2015, the bank posted a €207,000 pre-tax profit on operating income of €2.9 million.

MaltaToday understands that political pressure was also brought to bear upon the ECB to finally take action, when Belgian and Dutch depositors were being targeted by the online bank with some of Europe’s highest interest rates.

In 2015, the bank started marketing its 4% term deposits to attract 30,000 clients in the Belgian and Dutch market, so that it can start offering consumer loans by the second half of 2015.

matthew_vella
Matthew Vella is executive editor at MaltaToday.
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