Wave of panic cash withdrawals sweeps Latvia after false rumours of Swedbank bankruptcy hit social networks

Latvia was yesterday struggling to control a mass wave of panic cash withdrawals from the country’s biggest bank, Swedbank, following a rash of false social media network rumours which claimed that the Swedish-owned lending group was going bankrupt.

More than 126 of Swedbank’s 298 Latvian cash machines were reported to have run out of notes yesterday after anxious account holders withdrew in excess of  10 million Lats – the equivalent of £12m million- over the weekend and on Monday.

Long lines formed in front of Swedbank cash machines in the capital Riga after false rumours about the bank’s alleged financial difficulties had circulated on the social media network, Twitter.

Swedbank is a leading financial institution in Latvia and the neighbouring Baltic states of Estonia and Lithuania. Maris Marcinskis, Swedbank’s chief executive in Latvia, dismissed reports about the bank’s alleged liquidity problems  as “absurd”.

The false rumours, which started at the weekend, urged account holders to withdraw their cash and claimed that Swedbank had run out of money in Estonia and that its cash machines in Sweden were no longer working. “These were just outright lies,” Mr Marcinskis said.

Latvian police said they had launched an investigation in an attempt to track down the source of the false rumours.

The panic withdrawals appear to have been exacerbated by Latvia’s most recent banking crisis which occurred last month.

The government of Prime Minister Valdis Dombrovskis, was forced to nationalise Latvijas Krajbanka, the country’s 10th largest bank, after regulators found evidence of fraud. Depositors were unable to withdraw money for days as a result.

Mr Mancinskis blamed the Krajbanka scandal and the current “abundance of alarming headlines about Europe and the eurozone” for the jittery response of many Latvians to rumours and speculation about the financial markets and the banks.

Fears about financial stability have dogged Latvia since its independence in 1991. Three years ago false rumours about an imminent devaluation of the Lat – which is pegged to the euro - prompted widespread panic.

Later in 2008 a deepening economic crisis forced the government to turn to the International Monetary fund and the EU for a $10bn loan obtained in return for a strict austerity drive. Latvia’s economy shrank by 18 per cent in 2009, but has since been performing better.