Nemea: no liquidation possible before EU court decision

Depositors of the online-only Nemea bank who are expecting the return of their monies after the bank went under administration, will have to wait for the resolution of an appeal in the European Court of Justice.

Depositors have already been paid up to €100,000 individually for savings held at the bank under the depositor compensation scheme. But those holding over €100,000 will have to wait until the ECJ rules on the appeal filed by the bank’s owners.

Nemea plc and its owners Nevestor SA, Heikki Niemela and Mika Lehto have demanded that the court annuls a decision of the European Central Bank to withdraw their banking licence.

Nemea is now contesting the ECB’s decision, and is demanding €10 million in damages in its appeal before the European Court of Justice.

An MFSA source said it was not mandatory that a liquidator be appointed: “If the controller has gathered all the monies owed to the bank it could be possible to start the distribution of the remaining deposits. If a liquidator has to be appointed, it will be through a legal process in the Maltese courts. As things stand, depositors have to wait for the European Court of Justice’s decision on the Nemea appeal.” 

The bank has €68 million in assets, composed mainly of €30 million in loans and advances to customers and €22 million in loans and advances to banks. 

According to the unaudited financial position in March 2016, the bank owed €61 million to customers.

The online-only bank was placed under controllership in 2016, with PricewaterhouseCoopers taking on the role of ‘competent person’ to ensure that all assets owed to the bank are collected, and to protect depositors.

The bank’s licence was withdrawn on the MFSA’s recommendation after the ECB flagged “serious regulatory concerns” at the bank.

As an online-only bank Nemea could afford to operate with lower costs and overheads than traditional banks, 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.

But Belgian and Dutch depositors targeted by the bank with some of Europe’s highest interest rates, led to scepticism among financial observers. In one TV interview with Nemea Bank carried out by Dutch broadcaster RTL, the broadcaster described the 4% interest rate for five-year term deposits as a “banking stunt” that was 10 times more attractive than other bank offers. “The story is reminiscent of IceSave. That’s right: two men of an Icelandic bank sitting behind the bench. Nemea is not supervised by the Dutch National Bank. Is it safe? You have been warned.”

Nemea Bank owners Heikki Niemelä and Mika Lehto

Nemea Bank PLC is 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, and directors Heikki Niemelä and Mika Lehto. Former prime minister Lawrence Gonzi and financier Joseph F.X. Zahra had been directors prior to the suspension of the banking licence.

The bank posted a €214,000 pre-tax profit in the three-month period ended 31 March, 2016, on income of €865,000. In 2015, the bank posted a €207,000 pre-tax profit on operating income of €2.9 million.