Banks, EU – Baltic States, Financial Services, Investments, Latvia

Representatives of EBRD are currently on a visit to Latvia to become acquainted with the current situation in the country.

In the beginning of March, the head of Parex banka Nils Melngailis notified LETA that EBRD would announce in April its decision regarding possible acquisition of part of the Parex banka capital share.

Melngailis was optimistic and said that the EBRD was considering ways to support Parex banka.

EBRD has an extensive experience in restructuring banks and this organization's involvement in the reorganization process of banks is globally considered as a positive sign, proving the viability and development potential of banks, the Finance Ministry explained.

The level of EBRD involvement will determine, how much money the state will have to invest in the capital of Parex banka, turning part of the deposits into the bank's shares. Melngailis previously said that the bank's capital would need investments of between LVL 100 million to LVL 200 million. No precise figures have been announced yet regarding the amount of money to be invested to ensure the bank's capital adequacy, as the bank's audited annual report still has not been submitted.

As reported, the State Treasury has transferred EUR 232.5 million (LVL 163.4 million), the sum of money needed for repayment of the first part of the syndicated loan to Parex banka.

The government reviewed questions concerning Parex banka yesterday, at a closed government session. Dombrovskis refused to give any detailed comments about the meeting and only said that "no major decisions were adopted".

LETA also reported, last week, the government took the decision to repay the first part of the loan to the syndicated lenders this month.

Parex banka board chairman Nils Melngailis explained to reporters that the bank had offered to repay a smaller first installment, but after talks with the syndicated lenders, it was decided that 30% of the total loan amount or EUR 232.5 million would be repaid.

According to the government's decision, next year Parex banka will have to return EUR 310 million to the syndicated lenders, and the remaining EUR 232.5 million in 2011.

According to Melngailis, the money will be taken from the State Treasury, and the first payment could reach the syndicated lenders' accounts on March 18.

As reported, Parex banka has signed two contracts with the syndicated lenders – agreement on EUR 500 million (LVL 351 million) loan was signed on June 29, 2007 and on EUR 275 million (LVL 193 million) on February 21, 2008.