The European Central Bank (ECB) has decided to take Latvia's PNB Bank under its direct supervision at the request of Latvian banking regulator, the Latvian Financial and Capital Market Commission (FCMC) said in a statement Monday.

From now on, three Latvian banks will be under the ECB's direct oversight, which is implemented under the Single Supervisory Mechanism (SSM) of the European Banking Union. By taking PNB Bank under its supervision, the ECB has recognized it as systemically important.

The FCMC indicated that the ECB took the decision at the Latvian regulator's request, made in the light of an ongoing legal dispute between Latvia and PNB Bank over a wind farm project, which is being heard at the International Centre for Settlement of Investment Disputes (ICSID).

"The ECB listened to our arguments for taking over the bank's supervision and decided that such work organization would be optimal in future, taking into account the background of the international proceedings involving the Latvian state and the Latvian commercial bank," said FCMC head Peters Putnins.

The two other Latvian banks under direct ECB supervision are Swedbank Latvia and SEB Banka. Latvia joined the European Banking Union's Single Supervisory Mechanism in 2014.