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article imageWhy did Latvians withdraw $38 million from banks over weekend?

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By Andrew Moran     Dec 12, 2011 in Business
Riga - Unfounded rumors, including the nation’s largest bank’s ATMs would shut down, spread like wildfire across Latvia. More than 10,000 customers withdrew more than $38 million from ATMs, which led to half of the machines to be out of money.
Over the weekend, rumors swirled on Twitter and through word of mouth that Swedish financial institutions in Latvia were unstable and were on the brink of crises. This led to panic by the general public and mass withdrawals by Latvians.
Swedbank, the nation’s largest bank, said that it was coping after the weekend’s fiasco. The institution explained in a news release that 20 million lats ($38 million) was withdrawn from Latvian bank machines, which more than half ran out of money, by 10,000 individuals.
The baseless rumors that flooded the social media networks and text messages were that Swedbank’s ATMs would shut down, Swedbank would leave Latvia and the bank’s CEO was arrested. Much of the rumors, though, began last month when Latvian officials took over Krajbanka, a Latvian financial institution.
Authorities say the situation stabilized Monday morning and that the same incident did not spread to neighboring Estonia and Lithuania.
SEB, the nation’s second largest bank, was also affected to a degree. SEB spokesperson Elisabeth Lennhede said the bank’s deposits at the Swedish central bank were 12 times higher than the total Latvian deposit base.
“What we've seen is unusually large withdrawals from the ATMs following these rumours about the Swedish banks,” said Lennhede.
Swedbank has worked tirelessly to refill the ATMs. Branches throughout Latvia have operated normal business hours and many are working with extended operating hours to work with customers.
Thomas Backteman, Swedbank head of corporate affairs, said in Sweden during an interview with Fox Business News that the withdrawals are “insignificant in relation to our liquidity position.”
Establishing incorrect rumors and hoaxes that could potentially damage a nation’s financial structure is a criminal offence and could lead to an imprisonment of two years. Swedbank is working with local authorities to discover who started the rumors.
Swedbank shares were down three percent during the morning trading session.
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