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International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 06:56

EU Commission to probe state support for Latvian Reverta and Citadele

BC, Riga, 16.04.2014.Print version
Latvia's joint-stock Citadele banka and joint-stock Reverta face a European Union probe into Latvian state aid that may delay government plans to sell Citadele this year, LETA reports, referring to Bloomberg.

The European Commission said Latvia didn’t seek EU approval for extra support for the companies last year, which were formed after the country’s second-largest bank Parex got a government bailout in 2008. The EU “has doubts whether the additional measures are in line with the rules on state aid to banks,” it said in a statement.

 

The probe “will clearly delay the necessary exit of the government” from Citadele, said James Oates, chief executive officer of Tallinn, Estonia-based investment adviser ''Cicero Capital'', in a phone interview. The government may have to pay an indemnity to a purchaser which “complicates the process and reduces the price,” he said.

 

Latvia may lose as much as EUR 500 million of the money it used to rescue Parex, central bank governor Ilmars Rimsevics said in January. Once the second-largest bank in Latvia, Parex was split into two with Reverta holding non-performing assets.

 

Latvia also failed to comply with a pledge to sell Citadele’s wealth management business, the EU said.

 

Latvia’s privatization agency, the Finance Ministry, Reverta and Citadele will “promptly provide all the information necessary to assist” the EU probe, they said in an e-mailed statement.

 

The EU probe will focus on a subordinated state loan to Parex with a seven-year maturity, longer than the five years allowed, and an additional 18-month extension to the maturity of a subordinated loan. It will also examine liquidity support to Parex beyond the maximum approved by the EU.






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