Banks, EU – Baltic States, Financial Services, Latvia, Legislation, Loan

The Citadele sale agreement has been closed, and the Privatization Agency will cease its involvement with the bank, therefore, several changes will be made to the agreement terms signed with the shareholders, the Privatization Agency says.

The Privatization Agency will transfer a payment in the amount of about EUR 88 million – a monetary payment of EUR 77 million, and the Privatization Agency's subordinated loan for the bank in the amount of EUR 11.21 million.

At the end of 2008, joint-stock Parex banka was the second largest bank in Latvia with total assets of EUR 4.9 billion. It had been highly active in the Commonwealth of Independent States, which was severely hit by the financial crisis. This resulted in a loss of confidence in Parex and a subsequent run on the bank in 2008, with a 36 percent fall in deposits as compared to end 2007.

In November 2008, Latvia notified a package of rescue measures in favor of Parex. The Commission temporarily approved the measures in November 2008 based on Latvia's commitment to submit a restructuring plan. In May 2009, the Commission approved amendments to one of the measures. In July 2010, Latvia notified a restructuring plan for Parex, which the Commission approved in September 2010. The plan included a split of Parex into a newly established "good" bank, Citadele banka, taking over all core and some non-core assets, and a "bad bank" (Parex, later renamed Reverta), which kept the remaining non-core and non-performing assets. In August 2012, the Commission approved amendments to the restructuring plan.

On November 5, the sales agreement was signed between the Latvian Privatization Agency, a group of 12 international investors and Ripplewoods Advisors LLC for the purchase of state shares in Citadele in the amount of EUR 74 million. The European Bank for Reconstruction and Development (EBRD) will keep 25 percent of its stake in Citadele.