The European Central Bank said Monday it has frozen payments by the third-largest bank in tiny Baltic state Latvia, as its finances have deteriorated in the wake of money laundering allegations from Washington. "Temporarily, and until further notice, a prohibition of all payments by ABLV bank on its financial liabilities has been imposed, and is now in effect," the ECB said in a statement.

It is the first time the ECB has used its power to impose a moratorium since taking on eurozone-wide banking supervision responsibilities in 2014. The US Department of the Treasury last week named ABLV "an institution of primary money laundering concern" and accused it of connections to North Korea's weapons development programme.

ABLV's financial position, which had previously been stable, has rapidly deteriorated since as it found its access to the financial system cut off, even threatening the bank's survival. In late September 2017, the bank's balance sheet stood at around 3.6 billion euros ($4.5 billion), with 1.0 billion euros of loans and 2.7 billion in deposits.

In a statement, ABLV said the shock moratorium decision was taken to give the bank time "to stabilise the situation" and accumulate the funds "necessary for ensuring normal operation". The bank's listing on the Nasdaq Riga stock exchange was also suspended, according to the Baltic News Agency (BNS). Just two days before the ECB's moratorium, Latvian supervisor FCMC issued a statement saying the bank's capital and liquidity ratios - key indicators of a bank's financial health - were in good shape.

Copyright Agence France-Presse, 2018