ECB imposes payment block on Latvian bank amid US corruption allegations

A sign stands at the entrance to the ABLV Bank AS offices in Riga, Latvia. The country of 2 million became the 18th member of the euro area in January 2014.

The European Central Bank (ECB) stopped all payments by one of Latvia’s largest lenders on Monday, after its liquidity position collapsed in the wake of allegations from U.S. authorities.

The ECB requested Latvia’s banking supervisor impose a moratorium on ABLV bank, the small Baltic nation’s third-largest lender, in order to freeze all payments by the bank on its liabilities.

“In recent days, there has been a sharp deterioration of the bank’s financial position,” the ECB said in a statement Monday.

“A moratorium was considered necessary given that the bank is working with the Latvian central bank and authorities to address the current situation.”

What happened?

Last week, the U.S. Treasury accused ABLV bank of “institutionalized money laundering,” including allowing its clients to conduct business with parties connected to North Korea. This would be in violation of sanctions imposed by the United Nations (UN) following Pyongyang’s nuclear weapons program.

In response, ABLV said the accusations were based on unfounded and misleading information. ABLV is based in Riga but also has an office in Luxembourg as well as a subsidiary in the U.S.

Why is this a crisis?

The moratorium imposed by the ECB — which supervises ABLV from Frankfurt, Germany — comes at a difficult time for Latvia’s banking sector as the head of the country’s central bank was detained by Riga’s anti-corruption agency over the weekend.

The home and offices of Ilmars Rimsevics, who also sits on the ECB’s rate-setting committee, were raided by officers from Latvia’s Corruption Prevention Bureau on Saturday. However, no details about the investigation or the nature of the raids have been made public. Latvian media has suggested the questioning of Rimsevics was not connected to ABLV.

The detention of Rimsevics prompted Latvia’s Prime Minister Maris Kucinskis to call an emergency cabinet meeting Monday. Shortly afterward, he told Latvian television that the head of the country’s central bank should resign.

Retail investors would ‘bear the brunt’ of a cryptocurrency market collapse, study says

Bitcoin

Retail investors would feel the impact of a cryptocurrency market collapse the most, while institutional investors would be better protected against such an event, according to researchers.

“At this stage, we think that retail investors would be the first to bear the brunt in the event of a collapse in cryptocurrencies’ market value,” a report released by S&P Global Ratings said Monday.

“We expect rated banks to be largely insulated, given that their direct or indirect exposure to cryptocurrencies appears to remain limited.”

Cryptocurrencies dropped in price significantly amid a sharp sell-off earlier this month. The nascent market has recovered slightly following that decline, but the so-called market capitalization — the price of cryptocurrencies multiplied by circulating supply — is still around $330 billion off a record high posted last month.

The price of bitcoin fell below the $6,000 mark in the midst of a global stock market sell-off in early February, indicating that it shares a correlation to established financial assets.

Nevertheless, the S&P Global Ratings report said that a huge drop in the value of cryptocurrencies would still be unlikely to disrupt financial markets.

“For now, a meaningful drop in cryptocurrencies’ market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate,” Mohamed Damak, S&P Global Ratings financial institutions sector lead, said in a statement Monday.

Digital currencies are not backed by governments and authorities have become increasingly concerned by them due to speculative investing and associated illicit activities.

“We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants’ confidence in these instruments,” Damak added.

It said that cryptocurrencies’ underlying blockchain technology could lead to “positive” disruption in finance. Blockchain networks are decentralized, and maintain a continuously growing record of cryptocurrency transactions.

Retirement savings: Money in accounts like IRAs, on average, now tops $100,000

'Retire Inspired' author Chris Hogan on Americans' concerns about the impact of recent market volatility on their retirement savings.

mericans may be turning into a nation of savers.

Fidelity Investments says that the average balance in its customers’ 401(k) and individual retirement accounts (IRA) accounts grew last year to least six figures, driven by a strong stock market and increasing contributions.

Fidelity said the average 401(k) balance rose to $104,300 at the end of last year, 13% higher than in the same period in 2016. Meanwhile, the average IRA balance climbed to $106,000, also a 13% year-over-year increase. That compares to the average 401(k) balance of $77,600 in the fourth quarter of 2012 and an average balance of $76,600 for IRA accounts in the same period in 2012.

Long-term 401(k) savers saw significant increases to their average account balance as well. For workers who have contributed to their retirement 401(k) for 10 consecutive years, the average account balance rose to $286,700, an increase from $233,900 from the year before. For those who have been in their 401(k) retirement plan for 15 consecutive years, the average balance rose to $387,100, up from $318,500 in the fourth quarter of 2016.

Furthermore, the number of savers with at least $1 million in their 401(k) account increased to 150,000 at the end of 2017, which is up from 93,000 a year ago, Fidelity said. The number of investors with $1 million in their IRA account climbed to 152,000, an increase from 109,000 at the end of 2016.

Fidelity found that nearly one third of 401(k) savers increased their savings rate last year, which rose to 8.6% in the fourth-quarter of 2017, a 0.2% increase from the prior year. The average IRA contribution rate increased to $1,730 in the last quarter of 2017, up from $1,590 the year before.

“It’s important for individuals to remember that saving for retirement is a marathon, not a sprint, and that applying a long-term approach to retirement savings strategy helps to put investors in a better position to reach their savings goals,” said Kevin Barry, president of workplace investing at Fidelity Investments.

In an effort to keep the progress on track and to help ensure investors aren’t over-exposed to a market downturn, the company recommends clients check the percentage of stocks within their retirement account. The company reasoned that although the rising stock market is one reason why the average retirement account balance has reached record levels, it may also result in some savers having more stock in their account than they feel comfortable with.

Fidelity also recommends investors “think twice” before tapping their retirement accounts — being aware of the potential downsides before taking out a 401(k) loan.

“For instance, the amount borrowed could miss out on potential market growth, and if someone leaves a job, the loan may have to be repaid in full in as little as 30 days,” the company said, adding that data it compiled found many investors choose to reduce their contribution rate when taking out this type of loan, which increases the negative impact on long-term savings potential.

The company also suggests people consider a “do it for me” investment option — such as a target date fund or managed account — which it says is an “increasingly popular way for individuals to leverage professional investment expertise to help them manage their retirement savings.”

“Fidelity encourages investors ‘stay the course’ when the stock market goes down, but the same approach applies when the market swings upward, as it did in 2017,” Barry said. “Most investors will likely see multiple periods of market volatility during their careers, so sticking to the retirement savings fundamentals can help keep them on the path to their retirement goals.