RIGA — Latvia’s government has decided to split Parex Bank, the troubled financial institution it nationalized late in 2008, into two parts in order to improve chances for a privatization.
With the decision, which was unanimous, the government essentially approved the proposal put forward by Nomura International to create two banks, one in which the best assets would be placed, and another that would have non-core assets and liabilities.
About two-thirds, or 1.5 billion lats (€1.1 billion), of Parex’s current assets will be transferred to the new bank, which ostensibly will have a new name. This scheme, which must be approved by the [private_supervisor]European Commission, will hopefully provide the necessary clarity and attractiveness to sell the restructured bank to a strategic foreign investor, something the government wishes to do as quickly as possible.
The risks are that the government of Prime Minister Valdis Dombrovskis, now in minority, could face a rash of lawsuits from depositors and small shareholders.
Still, Dombrovskis stressed that of all the available options on the table this was the most viable.
Nationalization pushed state to IMF
Parex Bank nearly went insolvent in the fall of 2008 after the collapse of Lehnmen Brothers, and only a state takeover prevented its bankruptcy. The bank was the third-largest in Latvia at the time, and its collapse would have likely meant a complete meltdown of the country’s banking industry.
Since then the government has dumped over a billion euros in propping up the bank, leaving it vulnerable to criticism from both politicians, economists and rank-and-file voters. Many feel that if Latvia had not been saddled with Parex the government would not been compelled to arrange the €7.5 billion bailout loan with the International Monetary Fund in December 2008.
The government managed to sell one-fifth of Parex to the European Bank for Reconstruction and Development, which help firm the bank’s shaky reputation.
Reports indicate that there are well-known Western banks and lesser-known investors who are interested in acquiring the state’s 77 percent stake in Parex.
In other news, Parex announced Tuesday that it signed an agreement with the European Investment Bank for a €100 million loan to be used for financing small and medium-sized businesses. The loan will be available once the European Commission approves the bank’s restructuring plan, Parex said in a statement. [/private_supervisor] [private_subscription 1 month]European Commission, will hopefully provide the necessary clarity and attractiveness to sell the restructured bank to a strategic foreign investor, something the government wishes to do as quickly as possible.
The risks are that the government of Prime Minister Valdis Dombrovskis, now in minority, could face a rash of lawsuits from depositors and small shareholders.
Still, Dombrovskis stressed that of all the available options on the table this was the most viable.
Nationalization pushed state to IMF
Parex Bank nearly went insolvent in the fall of 2008 after the collapse of Lehnmen Brothers, and only a state takeover prevented its bankruptcy. The bank was the third-largest in Latvia at the time, and its collapse would have likely meant a complete meltdown of the country’s banking industry.
Since then the government has dumped over a billion euros in propping up the bank, leaving it vulnerable to criticism from both politicians, economists and rank-and-file voters. Many feel that if Latvia had not been saddled with Parex the government would not been compelled to arrange the €7.5 billion bailout loan with the International Monetary Fund in December 2008.
The government managed to sell one-fifth of Parex to the European Bank for Reconstruction and Development, which help firm the bank’s shaky reputation.
Reports indicate that there are well-known Western banks and lesser-known investors who are interested in acquiring the state’s 77 percent stake in Parex.
In other news, Parex announced Tuesday that it signed an agreement with the European Investment Bank for a €100 million loan to be used for financing small and medium-sized businesses. The loan will be available once the European Commission approves the bank’s restructuring plan, Parex said in a statement. [/private_subscription 1 month] [private_subscription 4 months]European Commission, will hopefully provide the necessary clarity and attractiveness to sell the restructured bank to a strategic foreign investor, something the government wishes to do as quickly as possible.
The risks are that the government of Prime Minister Valdis Dombrovskis, now in minority, could face a rash of lawsuits from depositors and small shareholders.
Still, Dombrovskis stressed that of all the available options on the table this was the most viable.
Nationalization pushed state to IMF
Parex Bank nearly went insolvent in the fall of 2008 after the collapse of Lehnmen Brothers, and only a state takeover prevented its bankruptcy. The bank was the third-largest in Latvia at the time, and its collapse would have likely meant a complete meltdown of the country’s banking industry.
Since then the government has dumped over a billion euros in propping up the bank, leaving it vulnerable to criticism from both politicians, economists and rank-and-file voters. Many feel that if Latvia had not been saddled with Parex the government would not been compelled to arrange the €7.5 billion bailout loan with the International Monetary Fund in December 2008.
The government managed to sell one-fifth of Parex to the European Bank for Reconstruction and Development, which help firm the bank’s shaky reputation.
Reports indicate that there are well-known Western banks and lesser-known investors who are interested in acquiring the state’s 77 percent stake in Parex.
In other news, Parex announced Tuesday that it signed an agreement with the European Investment Bank for a €100 million loan to be used for financing small and medium-sized businesses. The loan will be available once the European Commission approves the bank’s restructuring plan, Parex said in a statement. [/private_subscription 4 months] [private_subscription 1 year]European Commission, will hopefully provide the necessary clarity and attractiveness to sell the restructured bank to a strategic foreign investor, something the government wishes to do as quickly as possible.
The risks are that the government of Prime Minister Valdis Dombrovskis, now in minority, could face a rash of lawsuits from depositors and small shareholders.
Still, Dombrovskis stressed that of all the available options on the table this was the most viable.
Nationalization pushed state to IMF
Parex Bank nearly went insolvent in the fall of 2008 after the collapse of Lehnmen Brothers, and only a state takeover prevented its bankruptcy. The bank was the third-largest in Latvia at the time, and its collapse would have likely meant a complete meltdown of the country’s banking industry.
Since then the government has dumped over a billion euros in propping up the bank, leaving it vulnerable to criticism from both politicians, economists and rank-and-file voters. Many feel that if Latvia had not been saddled with Parex the government would not been compelled to arrange the €7.5 billion bailout loan with the International Monetary Fund in December 2008.
The government managed to sell one-fifth of Parex to the European Bank for Reconstruction and Development, which help firm the bank’s shaky reputation.
Reports indicate that there are well-known Western banks and lesser-known investors who are interested in acquiring the state’s 77 percent stake in Parex.
In other news, Parex announced Tuesday that it signed an agreement with the European Investment Bank for a €100 million loan to be used for financing small and medium-sized businesses. The loan will be available once the European Commission approves the bank’s restructuring plan, Parex said in a statement. [/private_subscription 1 year]
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