Latvian government takes majority stake in Parex Bank

November 11, 2008 Yesterday, Latvia's government took over Parex Bank, the second largest bank in Latvia. A 51% stake in the bank was taken for a nominal fee. Control of the bank is to be passed to Latvijas Hipotēku Banka (Mortgage and Land Bank), which is state-controlled.

The deal was first announced on Saturday, and an agreement was signed yesterday. The arrangement reflects similar bank takeovers by other governments across the world, in response to the current banking crisis. A Reuters report yesterday quoted board member Liga Purina as saying that withdrawals are above average, though there are few queues.

The action comes in the wake of Parex admitting to financial difficulties. Until this move, the biggest shareholders were the chairman, Valērijs Kargins, and Viktors Krasovickis. Parex Bank operates in 14 countries, including Sweden, Estonia and Germany, and is the largest locally-owned Latvian bank.