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Markets and depositors are watching fearfully to see how great the fallout from the liquidation of Lithuania's Banka Snoras and its Latvian subsidiary Latvijas Krajbanka will prove. But how did the authorities let things get so out of hand in the first place?

Given that Vladimir Antonov, the majority owner of Snoras, was barred from running major businesses in two Western European countries in the last three years, as well as widely believed to be a central figure in a protracted fight with Riga over control of Latvia's flag carrier airBaltic, what took the Baltic authorities so long to act?

The Lithuanian central bank's concerns over the state of Snoras' balance sheet were made public at the start of 2011, suggesting they were aware of potential problems through at least a portion of last year. But, of course, the fears stalking Europe's banks weren't so pressing then.

It's easy to let a few things slide when times are good. But the dangers that the huge holes on Snoras' books - the central bank on November 24 said some LTL3.4bn (about €1bn) in assets are missing, three times the €300m initially estimated - will stifle lending and growth illustrates how sound regulation matters, especially when the sun shines.

On November 24, Antonov, who also owns the English football club Portsmouth, was detained in London under a European arrest warrant issued by Lithuanian prosecutors on suspicions of embezzlement and fraud. But perhaps it would have been better to have exerted better control over his banks, from which it appears he was using the population's cash to try to wrest control of the region's largest airline from the state, and also to extend influence by building a media empire.

What a banker

Antonov took control of his first bank at the grand age of 24 when his father installed him at the head of Russian Akademkhimbank, which had close ties to the country's nuclear sector, clearly illustrating decent contacts with the Russian government of the time. In a 1999 interview with a bne journalist, he explained that "the Ministry of Nuclear Power... founded the bank along with 11 nuclear enterprises." However, the bank appears to have lost its grip on the sector recently.

During privatisation in 2002, Antonov junior began buying up the shares in the bank, and had consolidated 84% three years later. Changing the name to Conversbank, an acquisition spree pushed it into the top 100 Russian banks by assets by the end of 2006, with the wider banking group owning Snoras and Krajbanka, alongside another six Russian banks in Russia (including a retail arm Investbank) and a small institution in the UK.

Antonov's impact on the likes of Russian Investbank has been rated favourably in the past. "His strengths include substantial banking experience plus entrepreneurial and organisational skills and a wide networks of contacts," RusRatings said in a bank rating report in the naughties. "Antonov's capital investments in other banks, including non-resident financial institutions, and an established reputation in Russian banking circles have allowed Investbank to draw on a substantial volume of interbank resources."

However, rumours of money-laundering and associations with organised crime have dogged the Antonovs, despite attempts to cleanse their reputation. Yet the authorities in the Baltics should have sat up and taken notice of the question marks attached to the probity of their banking assets perhaps. Even the Central Bank of Russia refused the group permission to participate in its Deposit Insurance Scheme when it was first set up. That regulatory hurdle was followed by similar moves in Sweden and the UK.

Whilst Antonov was allowed to take control of the troubled Portsmouth Football Club in March, just about anyone can buy a British football club. Just ask the exiled former Thai prime minister Thaksin Shinawatra. However, back in February 2009 the UK's Financial Services Authority barred Snoras from opening a branch in the UK, because it repeatedly gave "misleading and incomplete" answers to the regulator. "These failures are not an isolated instance, but are examples of an ongoing pattern of behaviour by institutions controlled by Mr Antonov," the FSA claimed.

Last year, Snoras was forced by the Swedish authorities and General Motors to sell its 30% stake in Spyker Cars, which was in the process of taking over Saab, although the authorities later said that they had found little evidence to back up suspicions of illegal activities.

Once bitten ...

If problems overseas didn't raise enough red flags, then the Baltic authorities didn't need to look further than out the window to find more; both Anatonov's Baltic banks Snoras and Krajbanka have performed several complex share and asset moves since the parent bank received reprimands from the Lithuanian central bank at the start of the year.

However, that was hardly the first of Antonov's controversies in the region. Seen locally as a Russian oligarch, the main point of contention has been his secretive involvement in the fight over Latvian flag-carrier airBaltic, alongside reported interest in acquiring influence in the media.

Whilst the long fight over control of the airline officially starred CEO Bertolt Flick, it's widely believed that "wealthy backers" stood behind the German and his Bahamas-registered Baltic Aviation Systems, which held 47.2% of airBaltic. Russian entrepreneur Stanislav Kovtuna has been mentioned as Flick's business partner - via Taurus Asset Management Fund Ltd. - but this in turn is rumoured to be merely a front for Antonov. The fact that all of BAS' assets are held with Krajbanka and Snoras makes you wonder. Amongst questionable deals that BAS did during the fight with Riga over airBaltic, it was thought to have bought a large batch of "missing" shares (eventually ruled illegal) and to have sold itself exclusive rights to the "airBaltic" brand in December 2010, only to charge the airline a monthly fee to use its own name. In June, just ahead of a government move to put the issue to bed by cementing its control of airBaltic, it was reported that Snoras and Flick were considering investing in a new Lithuanian carrier, but nothing got off the ground.

Meanwhile, the Lithuanian bank has also been at the head of a thrust to build a collection of media assets. Snoras Media Investicijos is already the biggest shareholder of the country's most trusted daily newspaper, Lietuvos Rytas and the rest of Lietuvos Rytas media group (a TV channel, the daily, several magazines and a publishing house which prints most Lithuanian media), and some public alarm at the group's influence has been reported. In December 2010, Snoras was rumoured to be trying to purchase Delfi, the strongest news portal in the Baltic states, read by millions and reporting in four languages.

Rumours have also been circulating that Antonov has discussed the Latvian-language Neatkariga daily with its owner, Latvian oligarch and politician Aivars Lembergs, a known associate who is currently on trial for money-laundering and fraud. Suspicion also persists that Antonov has already bought New Media Group, which publishes the Russian-language Telegraf newspaper.

Twice shy?

Yet the biggest clue for the authorities should have been their own warnings to the two banks at the start of the year during annual checks.

Verslo zinios reported on January 18 that Snoras was informed by the regulatory authorities about "certain requirements" to limit "the risks of the bank's actions, especially when it comes to loans, derivative bargains, etc." On January 20, Snoras released a statement admitting it had not strengthened its capital base sufficiently, as agreed in previous meetings. It promised to provide a plan to tackle the problem.

Reuters reported on February 17 that despite the reprimand, Snoras had granted a $75m loan to beleaguered Russian real estate developer Miramax Group. The interest on the loan is at a suspicious low level of 7.09%, especially as before the company had previously been taking out loans for at 11-19% annual interest rates from other banks.

Meanwhile, on February 4 the two main shareholders of Snoras Group, Antonov and Raimondas Baranauskas, established a new publicly listed company, Snoras Holdings.