The problems in the Baltic banking sector continued to snowball on November 23, with Latvian authorities saying they will not be able to fulfill the obligations of Latvijas Krajbanka and will likely have to shut it down, whilst Lithuania issued an arrest warrant for the Russian majority owner of the parent bank Snoras, and suggested it may have to pull out of the 2012 Olympics.

The news increases concern, both amongst depositors across the Baltics and on the part of the markets looking at risk to the region’s economy as a whole, despite insistence from the authorities that the takeovers of the Snoras and its Latvian subsidiary Krajbanka over the last week or so do not indicate a systematic risk for the banking sector. The authorities loosened a ban on withdrawals from Krajbanka on November 23, allowing depositors to access up to LVL50 per day, and queues promptly formed at cash machines in Riga and elsewhere.

Speaking to a local TV station, Janis Brazovskis, an official from banking supervisor FKTK who has been put in charge of Krajbanka, said it “will, in all likelihood, have to be liquidated,” reports Reuters. “To put it simply, I and my colleagues in Krajbanka cannot fulfill all the obligations that Krajbanka has to fulfill,” he said. Authorities said on November 22 that up to LVL100m (EUR142m) could be missing, the same day that Latvia cancelled a debt sale due to increased investor nervousness.

The hole in Snoras’ balance sheet was originally estimated at around €300m on November 17, but little news has been forthcoming from investigators in Vilnius, heightening worries. Lithuanian prosecutors announced on November 23 that they had issued a European arrest warrant for the majority owner of Snoras, Russian citizen Vladimir Antonov. Along with Lithuanian partner Raimundas Baranauskas, Antonov is the main suspect in a pre-trial investigation into the alleged fraud and money laundering case the authorities launched when they took the bank over. Both suspects are believed to be in the UK.

Brazovskis said the problems at the two banks may be connected with a recent unsuccessful attempt by Antonov to buy out Swedish carmaker Saab, which was blocked by authorities due to a lack of transparency about the origins of his capital. The Latvian official suggested that the approximate LVL100m missing from Krajbanka was used to finance Antonov’s investment projects, reports AP.

However, one associate is now under arrest. Krajbanka’s former president, Ivars Prieditis, who signed the documents ordering the asset transfers, was detained by Latvian police on November 23. Meanwhile, Lithuania‘s Olympic committee warned that it might not be able to send its athletes to London next summer since its funds were deposited in Snoras.