The request for credit from the Baltic state's central bank comes amid frantic efforts by ABLV's management to keep the bank afloat after US authorities singled it out for money laundering and moved to block it from doing financial deals in dollars.
Although ABLV said it raised more than $1.67 billion, over four business days, the European Central Bank said it lacked adequate cash liquidity. "We want to give an opportunity ... for the bank to ensure its short-term liquidity, so that it can continue operating", the Baltic state's finance minister, Dana Reizniece-Ozola, told a news website, Delfi.lv.
The ECB explained that since ABLV Ban's liquidity has significantly deteriorated over the past week the bank is unlikely to be able to pay its debts or other liabilities.
Latvian authorities will gather for an emergency meeting on Monday following the failure of the country's third-largest bank, the Prime minister said on Saturday, as the country kept watch for any fallout on other banks. This resulted in the bank being unable to make payments in U.S. dollars, " the ECB went on to say.
More than $700 million in deposits and securities - 18 percent of its liabilities at end-September - were withdrawn after the U.S. Treasury described the bank's practices as "institutionalized money laundering".
"We believe that the bank has a future, on the basis of a substantially reduced business", Vadims Reinfelds, deputy chief executive, said. The banking sector "has to be cleaned up", she said, stressing that the problem was isolated to ABLV and the country of 2 million wasn't suffering from a banking crisis. "This is a clear signal to other banks that the situation is serious".
The spokesman also confirmed that the bank was seeking the emergency loan.
With a €3.63bn balance sheet at the end of September, ABLV is comparatively small by worldwide standards.
The ECB has given the bank until Friday to provide it with details of how it plans to survive if the payment moratorium is lifted. Customers can contact the bank directly or the FCMC which is the administrator for the Latvian deposit guarantee fund, " the ECB points out.
Still, even under a scenario of substantial spillover, the Latvian government's exposure "is not material or potentially capable of undermining the country's strong fiscal position", it said.