Latvia Takes Over Parex Banka

Latvian government has toughened the bailout program for Parex banka. It will control 85 percent in the bank instead of 51 percent as it initially planned. Founders and former principal holders Valery Kargin and Viktor Krasovitsky will lose not only all stocks but also the chance for their back buyout.
Latvian government focused yesterday on Parex banka’s takeover into the state ownership. Latvia’s Finance Ministry’s State Secretary Martins Bicevskis announced the day before that the bank’s founders Valery Kargin and Viktor Krasovitsky agreed to give up the stocks that remained in their ownership.

Under the deal of November 8, the principal holders of Parex banka, Kargin and Krasovitsky, were to transfer to the state-run Hipoteku banka no more than 51 percent of their stocks, retaining 34 percent in their ownership.

The new variant of the deal provides for the state takeover of all 84.83 percent in the bank without any additional compensation to former owners. Kargin and Krasovitsky parted with 51 percent for symbolic 2 Latvian lats and the state guarantee for the execution of bank’s liabilities. Under both variants of the deal, the minority holders will retain the remaining 15.17 percent in Parex banka.

In Latvian government, they don’t see any other methods to stop the outflow of depositors. The overall amount of deposits with Parex banka narrowed by 500 million lats (€711.4 million) in September through November. The liquidity is going down, undermining client’s confidence and the decisive actions are to be taken in such situation, Latvian Finance Minister Atis Slakteris made clear yesterday.