Last week we reported that as part of a rapidly deteriorating banking crisis in Latvia, which culminated with the detention of central bank head Ilmars Rimsevics on suspicion of accepting a bribe of more than €100,000 (which prompted both the prime minister and president to demand his resignation, something he has so far refused to do), the European Central Bank froze all payments by Latvia's largest private bank, ABLV, following U.S. accusations the bank laundered billions in illicit funds, including for companies connected to North Korea’s banned ballistic-missile program.

Then overnight the Latvian banking crisis escalated when in a statement released early Saturday, the ECB said ABLV Bank’s liquidity had deteriorated significantly, making it unlikely to pay its debts and declaring it "failing or likely to fail." As a result, Latvia's third largest bank will be wound up under local laws after the European Central Bank

Following the ECB’s decision, which also included the bank’s subsidiary in Luxembourg, the WSJ reported that Europe’s banking resolution authority decided the banks didn’t represent a systemic risk for their countries or the region and should be wound up by local authorities rather than be “bailed in” under EU rules.

And so, on Saturday ABLV said it would be liquidated. In four days, the bank claimed, it had raised enough capital to meet all its depositors’ demands and keep functioning, however "Due to political considerations the bank was not given a chance to do it," it said in a statement.

As we discussed previously, ABLV’s fall follows a move by the U.S. Treasury last week to block its access to U.S. dollars, accusing it of “institutionalized money laundering.” It said most of the bank’s customers were shell companies registered outside Latvia. ABLV said it isn’t guilty of money laundering and has invested heavily in compliance systems. It was not enough.

The speed of ABLV's collapse has been breathtaking: It started less than two weeks ago, when on February 13 the U.S. Treasury declared the bank’s practices a form of money laundering. Latvia’s third biggest bank had long been a lead player in an industry that has been a boom for the former Soviet state: helping shell companies in and around Russia bring their money into the European Union.

The collapse is bad news for the bank's larger depositors: Under European bail-in rules, shareholders, creditors and depositors of more than €100,000 would be in line for losses before taxpayers were called to help the bank. Deposits of as much as €100,000 are protected under Latvian and Luxembourg laws.

The resolution authority “concurred with the ECB’s assessment and concluded that there are no available supervisory or private sector measures which could prevent the failure of the banks,” it said in a separate statement.

It is unclear how many depositors will be hurt by the bail-in.

The blitz-collapse has prompted fears of a bank run, amid growing uncertainty if other local banks are also under the US microscope, coupled with the apparent disorganized chaos by local authorities.

On Friday, Latvia’s chief banking regulator tried to assure the country’s depositors that ABLV posed no risk to the system and was on track to receive as much as €480 million in emergency aid from the national central bank.

That did not happen, as the ECB's statement confirms the bank did not receive the aid. In other words, in hopes of preventing a bank run, the local regulator lied to Latvian depositors who at least had a chance to remove any savings that were above the insured threshold.

They won't have that option now, and depositors at other banks may decide they don't want to wait and see if they will suffer a similar fate.

European regulators have repeatedly flagged risks about Latvian banks’ heavy exposure to nonresident account holders. Still, it was the U.S. Treasury that brought the issue into the open.

And now, five years after the Cyprus bail-ins, we look forward to learning which Latvian, Russian and/or Ukrainian oligarchs saw most of their savings vaporize overnight.