Banks, Financial Services, Latvia, Legislation

49 Saeima members voted for the law, 22 voted against, 12 abstained.

The bill, prepared by the Finance Ministry, stipulates that bank takeover deals must be carried out on the basis of an agreement for fair compensation on the basis of individual agreement. If no agreement can be reached on a voluntary bank takeover, a new law will have to be drawn up for each such case, writes LETA.

The bank takeover will be carried out by the state taking control over the bank shares or the bank properties, rights and liabilities.

If no agreement can be reached within five days after the talks begin with the bank, the finance minister will have to prepare a bill on forcible takeover of the bank. The final decision on the takeover of a bank will be made by Saeima.

The law pertains to banks registered in Latvia and foreign banks' branches in Latvia.

A bank may be taken over by the state when the situation at the bank poses threat to stability of the Latvian banking system or payments system.

As reported, this law may be invoked so the state could acquire 100% of Parex banka shares, which is necessary for the government could to receive money for bailing the bank out.

The state, which has already acquired 84.83% of Parex banka shares from Valerijs Kargins and Viktors Krasovickis, who were paid LVL 1 each for their shares, wants to get the minority shareholders' shares too. All the minority shareholders have already been offered to sell their shares to the state.

Foreign institutional shareholders in Parex banka include East Capital Funds with a 4.17% stake, Danske Capital Funds with 2.74%, Julius Baer International Equity Fund – 2.19%, Firebird Funds – 1.82%, Svenska Handelsbanken AB – 0.31%.

Other institutional shareholders control a total of 1.30% of Parex banka shares, and other private shareholders – 2.64%. Svenska Handelsbanken AB has agreed to sell its Parex banka shares to the government for one eurocent.

The newspaper Diena reported yesterday that the state would have to acquire a 100% control over Parex banka in order to receive loans from international financiers.