Latvian government increases holding in Parex to 84 pct
03.12.2008, 11:43The government Latvia, which is in aid
talks with the IMF and European Union, decided on Tuesday to raise its control
of troubled bank Parex from 51 pct to 84 pct, the Finance Ministry said, Reuters
reports.
The move came as part of efforts to cap withdrawals from Parex, the second
largest bank in Latvia, which the government last month decided to rescue by
taking a 51 percent stake.
The bank suffered a run on deposits and faces repayment of syndicated credits
next year worth EUR 775 mln. Now the state has moved further to boost its
control.
"... agreement has been reached to change the terms of the takeover of Parex,
stating that the bank's largest shareholders hand over all their Parex Bank
shares, or 84.83 pct of the bank's capital," the Finance Ministry said in a
statement.
Another 15 percent would remain with minority shareholders.
The two main shareholders are well known Russian-speaking businessmen Valery
Kargin and Viktor Krasovicky.
Finance Minister Atis Slakteris said the decision to increase the state's
control was a further step in preventing cash fleeing the bank, saying Kargin
and Krasovicky had failed to do enough to stop deposits leaving.
"As a result the level of the bank's liquidity continued to fall, threatening
the confidence of clients and depositors, leading to the need for fast and
decisive action," he added.
Some of Parex's main clients are non-residents, meaning mainly companies and
individuals in Russia and other former Soviet states.
The Parex woes after a
slide into recession were the main reasons Latvia had to turn for aid to the
International Monetary Fund and European Union for help.
Slakteris has said Finance Ministry experts estimate Latvia needs EUR
5 bln in help.
Bank sector supervisor the Finance and Capital Markets Commission earlier on
Tuesday slapped limits on withdrawals from Parex from LVL 35,000 a month for
individuals to LVL 350,000 for companies with up to 250 employees.
No withdrawal limits have been applied for firms with more than 250
employees, to payments to the state budget, state institutions or to dealings
with the central bank.
Payments of interest on deposits or to Parex subsidiaries are also not
affected. ´
A final agreement on the government takeover of Parex has yet to be completed
as banks which gave the syndicated credits have not agreed to it. Negotiations
are still going on.