Warnings from ECB over Nemea bank since 2015

Warnings on the “serious regulatory shortcomings” inside the online-only bank Nemea, which is headquartered in Portomaso, have been pouring in from the European Central Bank for the past 12 months.

A regulatory source has told MaltaToday that it was an urgent meeting that was convened by top officials from the finance ministry, the Central Bank, and the Malta Financial Services Authority on Tuesday evening, to take action on the European Central Bank’s warning on Nemea Bank.

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.

READ MORE Online bank Nemea under administration over ‘serious’ regulatory shortcomings

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.

But scepticism was apparent among some 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."

While the Maltese state offers depositor protection of up to €100,000, the Dutch retail market had already been sensitive to the IceSave banking crash, a national trauma for depositors that led Dutch finance minister and Eurogroup president Jeroen Dijseelbloem to publicly declare that Dutch savers should keep their money within the country.

Under administration

The direct bank is owned by its two Finnish co-chairmen, Mika Lehto and Heikki Niemelä, and its directors include former prime minister Lawrence Gonzi and Joseph F.X. Zahra, recently appointed to head a special finance commission for the Vatican by Pope Francis.

Gonzi was responsible for finance when Nemea Bank was licensed by the MFSA on 2 September 2008.

Pricewaterhouse Coopers Malta has now been appointed to administer the bank and take charge of its assets, but deposits from customers will be halted and withdrawals capped at €250.

Some depositors have called in at MaltaToday offices claiming they have been unable to get a call through to the bank.

The bank is owned by Nevestor SA of Belgium (40%) while the rest is split between Ninovan Ltd and Shilmore Ltd of Cyprus (30% each), ultimately jointly owned by its founders Heikki Niemelä and Mika Lehto.

The MFSA has said that the measures to take the bank under administration followed an on-site inspection by the ECB that 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.

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

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