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Latvian government steps in to save the country’s second largest bank

By Editor . 18.12.2008

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In the middle of November, the Latvian government suddenly announced the nationalization of Parex Banka, the largest homegrown financial institution and the second largest in the country.

 

On 10 November the takeover agreement on the acquisition of a 51 percent controlling stake in Parex banka by the state-owned joint-stock company Latvijas Hipotēku un zemes banka (Mortgage and Land Bank) was signed, agreeing to pay 1.4 EUR to the each of  two former owners of Parex Bank Valerijs Kargins and Viktors Krasovickis. Thus the JSC Parex banka became a subsidiary of the JSC Mortgage and Land Bank. But on 3 December the Cabinet of Ministers decided to make amendments to the agreement, specifying that the Bank’s majority shareholders hand over to the state all of their shares in JSC Parex banka, or 84.83% of the Bank’s capital, with no right to buy them out. The rest of 15.17% of interest will still be retained by Parex Bank minority shareholders. The decision was made to prevent the excessive outflow of deposits and other funds from Parex banka that had started over the past month.




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