FRANKFURT: The Latvian lender which accused the country's central bank head of corruption is failing and will be shut down, European banking authorities said on Thursday.

PNB Banka, one of the smallest lenders under ECB supervision with just 550 million euros of assets, has seen "significant deterioration in its capital situation to the point that the bank's assets were less than its liabilities," the ECB said in a statement.

The lender came into the spotlight when it accused Latvia's central bank chief Ilmars Rimsevics of seeking bribes and using the local supervisor's decisions "as a goad to extort".

Rimsevics, who has denied all accusations, was briefly detained by Latvian authorities last year and barred from office for several months but the European Court of Justice said that Latvia has failed to prove his guilt so his removal was illegal.

While the ECB normally supervises larger institutions, it took over PNB Banka on a request by the Latvian financial watchdog, which said it was hoping this would help "avoid any misunderstanding and possible reproaches" after the bank's allegations.

In a separate release, the euro zone's Single Resolution Board said that saving the bank was not in the public interest and it would be shut down under Latvian law.

Rimsevics, still faces corruption charges but has been reinstated as central bank chief and ECB Governing Council member while the legal proceedings are ongoing.

Anglo-Russian businessman Grigoriy Guselnikov, the bank's former owner who sold his shares earlier this summer, has brought a request for international arbitration against Latvia.

PNB, which was earlier called Norvik, was fined 1.5 million euros ($1.7 million) by the Latvian supervisor FCMC in 2017 for allowing clients to violate sanctions imposed by the European Union and United Nations on North Korea.