RIGA — Latvia’s Cabinet of Ministers has approved a measure that will abolish monthly interest payments for the two founders and former owners of Parex Bank.

The measure, an amendment to the banking law, was approved Tuesday and will save Latvia, the only small country in Europe that has had to deal with a major bank insolvency, some 400,000 lats (€560,000 euros) per month. The amendment, which must still be approved by parliament, will go into effect on June 1 and will not be retroactive.

Former Parex owner Viktor Krasovitsky slammed [private_supervisor]the move, calling it New Era-sponsored populism on the eve of elections.

“The forthcoming litigation will, of course, put an end to the sale of Parex and all the money that the government is ready to invest in the bank,” Krasovitsky told the Delfi portal. “Government officials in the Finance Ministry cannot behave little common criminals and undermine trust in the country.”

Finance minister Einars Repše wasted no time in responding, telling reporters it was time that Krasovitsky and his colleague Valery Kargin accepted moral responsibility for the bank’s woes.

“If these two gentlemen did everything as best they possible could while managing the bank, then why did they have to turn to the government to save the bank?” Repše asked.

Krasovitsky and Kargin, who have tens of millions of lats in Parex, negotiated the 200,000 lats per month (for each of them) in late 2008 when it became clear that the government would have to take over the bank. Since then this monthly interest payment, which is tied to a 36 million loan they gave the bank in 2008, not long before it became insolvent, has become a source of extreme contention in both the halls of power and among Latvian taxpayers, who have had to foot the extraordinary bill for Parex’s insolvency. The government has dumped more than €1 billion into propping up Parex, and the debate whether it would have been better to let the bank collapse is still waged.

In October the government tried to enact similar legislation limiting interest payments to Krasovitsky and Kargin, but the attempt failed since it would have been retroactive.

Currently the state owns 73.4 percent of Parex Bank — a stake it hopes to sell possibly this year. Prime Minister Valdis Dombrovskis said earlier this month that there are no potential buyers for the bank so far since investors are waiting to see how the government restructures Parex. In March the government plans to split Parex into two parts, dividing the most profitable parts from those that are losing money or are simply moribund.

Parex CEO Nils Melngailis has said that the sale would likely take the form of an auction. He said the key factor at this point was not to allow any delays in strategic decision making involving the bank.

“Now when the situation in both Latvia and external financial markets is improving, there is no reason whatsoever to put off the restructuring of the bank,” Melngailis told BNS in an interview last week.

“We must not permit the elections to influence the bank’s fate. If this issue is put off for a year, it would mean that the state would be exposed to banking business risk for unnecessary long time. Moreover, it is vital for the bank itself to return to the private sector so that it could make important decisions more quickly,” Melngailis said.

Latvia’s government took over Parex in late 2008 after it became clear the bank could no longer afford to borrow on international markets and refinance its enormous debt. The takeover exacerbated Latvia’s already precarious public finance situation, and eventually forced the government of then Prime Minister Ivars Godmanis to turn to international lenders for a €7.5 billion bailout package.

[/private_supervisor] [private_subscription 1 month]the move, calling it New Era-sponsored populism on the eve of elections.

“The forthcoming litigation will, of course, put an end to the sale of Parex and all the money that the government is ready to invest in the bank,” Krasovitsky told the Delfi portal. “Government officials in the Finance Ministry cannot behave little common criminals and undermine trust in the country.”

Finance minister Einars Repše wasted no time in responding, telling reporters it was time that Krasovitsky and his colleague Valery Kargin accepted moral responsibility for the bank’s woes.

“If these two gentlemen did everything as best they possible could while managing the bank, then why did they have to turn to the government to save the bank?” Repše asked.

Krasovitsky and Kargin, who have tens of millions of lats in Parex, negotiated the 200,000 lats per month (for each of them) in late 2008 when it became clear that the government would have to take over the bank. Since then this monthly interest payment, which is tied to a 36 million loan they gave the bank in 2008, not long before it became insolvent, has become a source of extreme contention in both the halls of power and among Latvian taxpayers, who have had to foot the extraordinary bill for Parex’s insolvency. The government has dumped more than €1 billion into propping up Parex, and the debate whether it would have been better to let the bank collapse is still waged.

In October the government tried to enact similar legislation limiting interest payments to Krasovitsky and Kargin, but the attempt failed since it would have been retroactive.

Currently the state owns 73.4 percent of Parex Bank — a stake it hopes to sell possibly this year. Prime Minister Valdis Dombrovskis said earlier this month that there are no potential buyers for the bank so far since investors are waiting to see how the government restructures Parex. In March the government plans to split Parex into two parts, dividing the most profitable parts from those that are losing money or are simply moribund.

Parex CEO Nils Melngailis has said that the sale would likely take the form of an auction. He said the key factor at this point was not to allow any delays in strategic decision making involving the bank.

“Now when the situation in both Latvia and external financial markets is improving, there is no reason whatsoever to put off the restructuring of the bank,” Melngailis told BNS in an interview last week.

“We must not permit the elections to influence the bank’s fate. If this issue is put off for a year, it would mean that the state would be exposed to banking business risk for unnecessary long time. Moreover, it is vital for the bank itself to return to the private sector so that it could make important decisions more quickly,” Melngailis said.

Latvia’s government took over Parex in late 2008 after it became clear the bank could no longer afford to borrow on international markets and refinance its enormous debt. The takeover exacerbated Latvia’s already precarious public finance situation, and eventually forced the government of then Prime Minister Ivars Godmanis to turn to international lenders for a €7.5 billion bailout package.[/private_subscription 1 month] [private_subscription 4 months]the move, calling it New Era-sponsored populism on the eve of elections.

“The forthcoming litigation will, of course, put an end to the sale of Parex and all the money that the government is ready to invest in the bank,” Krasovitsky told the Delfi portal. “Government officials in the Finance Ministry cannot behave little common criminals and undermine trust in the country.”

Finance minister Einars Repše wasted no time in responding, telling reporters it was time that Krasovitsky and his colleague Valery Kargin accepted moral responsibility for the bank’s woes.

“If these two gentlemen did everything as best they possible could while managing the bank, then why did they have to turn to the government to save the bank?” Repše asked.

Krasovitsky and Kargin, who have tens of millions of lats in Parex, negotiated the 200,000 lats per month (for each of them) in late 2008 when it became clear that the government would have to take over the bank. Since then this monthly interest payment, which is tied to a 36 million loan they gave the bank in 2008, not long before it became insolvent, has become a source of extreme contention in both the halls of power and among Latvian taxpayers, who have had to foot the extraordinary bill for Parex’s insolvency. The government has dumped more than €1 billion into propping up Parex, and the debate whether it would have been better to let the bank collapse is still waged.

In October the government tried to enact similar legislation limiting interest payments to Krasovitsky and Kargin, but the attempt failed since it would have been retroactive.

Currently the state owns 73.4 percent of Parex Bank — a stake it hopes to sell possibly this year. Prime Minister Valdis Dombrovskis said earlier this month that there are no potential buyers for the bank so far since investors are waiting to see how the government restructures Parex. In March the government plans to split Parex into two parts, dividing the most profitable parts from those that are losing money or are simply moribund.

Parex CEO Nils Melngailis has said that the sale would likely take the form of an auction. He said the key factor at this point was not to allow any delays in strategic decision making involving the bank.

“Now when the situation in both Latvia and external financial markets is improving, there is no reason whatsoever to put off the restructuring of the bank,” Melngailis told BNS in an interview last week.

“We must not permit the elections to influence the bank’s fate. If this issue is put off for a year, it would mean that the state would be exposed to banking business risk for unnecessary long time. Moreover, it is vital for the bank itself to return to the private sector so that it could make important decisions more quickly,” Melngailis said.

Latvia’s government took over Parex in late 2008 after it became clear the bank could no longer afford to borrow on international markets and refinance its enormous debt. The takeover exacerbated Latvia’s already precarious public finance situation, and eventually forced the government of then Prime Minister Ivars Godmanis to turn to international lenders for a €7.5 billion bailout package.[/private_subscription 4 months] [private_subscription 1 year]the move, calling it New Era-sponsored populism on the eve of elections.

“The forthcoming litigation will, of course, put an end to the sale of Parex and all the money that the government is ready to invest in the bank,” Krasovitsky told the Delfi portal. “Government officials in the Finance Ministry cannot behave little common criminals and undermine trust in the country.”

Finance minister Einars Repše wasted no time in responding, telling reporters it was time that Krasovitsky and his colleague Valery Kargin accepted moral responsibility for the bank’s woes.

“If these two gentlemen did everything as best they possible could while managing the bank, then why did they have to turn to the government to save the bank?” Repše asked.

Krasovitsky and Kargin, who have tens of millions of lats in Parex, negotiated the 200,000 lats per month (for each of them) in late 2008 when it became clear that the government would have to take over the bank. Since then this monthly interest payment, which is tied to a 36 million loan they gave the bank in 2008, not long before it became insolvent, has become a source of extreme contention in both the halls of power and among Latvian taxpayers, who have had to foot the extraordinary bill for Parex’s insolvency. The government has dumped more than €1 billion into propping up Parex, and the debate whether it would have been better to let the bank collapse is still waged.

In October the government tried to enact similar legislation limiting interest payments to Krasovitsky and Kargin, but the attempt failed since it would have been retroactive.

Currently the state owns 73.4 percent of Parex Bank — a stake it hopes to sell possibly this year. Prime Minister Valdis Dombrovskis said earlier this month that there are no potential buyers for the bank so far since investors are waiting to see how the government restructures Parex. In March the government plans to split Parex into two parts, dividing the most profitable parts from those that are losing money or are simply moribund.

Parex CEO Nils Melngailis has said that the sale would likely take the form of an auction. He said the key factor at this point was not to allow any delays in strategic decision making involving the bank.

“Now when the situation in both Latvia and external financial markets is improving, there is no reason whatsoever to put off the restructuring of the bank,” Melngailis told BNS in an interview last week.

“We must not permit the elections to influence the bank’s fate. If this issue is put off for a year, it would mean that the state would be exposed to banking business risk for unnecessary long time. Moreover, it is vital for the bank itself to return to the private sector so that it could make important decisions more quickly,” Melngailis said.

Latvia’s government took over Parex in late 2008 after it became clear the bank could no longer afford to borrow on international markets and refinance its enormous debt. The takeover exacerbated Latvia’s already precarious public finance situation, and eventually forced the government of then Prime Minister Ivars Godmanis to turn to international lenders for a €7.5 billion bailout package.[/private_subscription 1 year]

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