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European Commission gives green light to Latvian bank bailout
Published in Saudi Press Agency on 10 - 11 - 2008

A government bailout of Latvia's largest indigenous
bank, Parex Banka, was set to be finalized Monday after the European
Commission (EC) signalled it would not block the deal, according to dpa.
Latvian Finance Ministry spokesperson Diana Berzina told Deutsche
Presse-Agentur dpa that an "unofficial okay" had been received from
the EC along with their comments on the deal.
She added that final confirmation from the EC was likely one or
two days after the legal document was due to be signed in a closed
meeting on Monday night.
Parex Banka is the second largest bank overall in the Baltic
country. It posted profits of more than 12 million lats (22 million
dollars) in the first nine months of 2008.
On Saturday night, Latvian Prime Minister Ivars Godmanis emerged
from a lengthy meeting to announce, "the government of Latvia today
made a decision that the state will become a majority stakeholder in
Parex Banka to secure the stability of Latvia's financial system."
In two days of frantic deal-making since then, government and
bankers alike have sought to play down the seriousness of Parex's
situation in a bid to stop a run on the bank. That seems to have
worked, with little evidence on Monday of account holders trying to
withdraw their money.
Godmanis even banned state-owned companies and local government
departments withdrawing funds from Parex on Monday as a demonstration
of confidence.
The terms of the deal will see the Latvian government take a
majority stake in Parex at an initial cost of 200 million lats (360
million dollars).
Parex's two founders and main shareholders, Valery Kargin and
Viktor Krasovitsky, have agreed to sell their stakes for the token
amount of 1 lat each, though they will also have first option on
buying back the shares after twelve months.
With the deal signed, Parex will become a subsidiary of
state-owned Hipoteku Banka with Hipoteku chairman Inesis Feiferis
taking over the reins as president of Parex.


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