Parex bought by government

RIGA 's The Latvian government has bought the controlling share of Parex Banka, on of the largest banks in the country, after a run on the bank saw customers withdraw millions in a matter of hours.

Prime Minister Ivars Godmanis told journalists this weekend that the government would buy the controlling share in Parex for the symbolic sum of 2 lats (2.8 euros).

The government will take over the controlling stake in Parex Bank through Latvia's Hipoteku un Zemes Banka (Mortgage and Land Bank).

Finance Minister Atis Slakteris said in a statement to the press that in "passing this decision, the government has acted in the interests of taxpayers and clients of commercial banks, including depositors and borrowers."

"This responsible step is a signal indicating the government's capacity and resolve. The banking sector is especially important to the state, as it constitutes the blood circulation of the national economy," Slakteris said.

As a result of the government's decision, Parex Bank will become a daughter company of Morthage and Land Bank. The 51 voting shares in Parex Bank will become the property of Mortgage and Land Bank, and Parex Bank's owners Valerijs Kargins and Viktors Krasovickis will be paid a total of two lats for the shares, said representatives of the Latvian Finance and Capital Market Commission.

The remaining shares, owned by the existing shareholders with voting rights, or 34 percent of the bank's capital, will be pledged as collateral to Mortgage and Land Bank

The prime minister said the government's decision was based on information about the bank's problems provided by the Finance and Capital Market Commission.

Godmanis said that the bank would still be able to continue its operations, and that the government made the decision in order to ensure the bank's stability and liquidity.

"It is necessary to do everything to avert disruptions of the bank and the financial system," the prime minister said.