Parex bought by government

RIGA 's The Latvian governmenthas bought the controlling share of Parex Banka, on of the largest banks in thecountry, after a run on the bank saw customers withdraw millions in a matter ofhours.

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

The government will take over the controlling stake in Parex Bank through Latvia'sHipoteku 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 oftaxpayers and clients of commercial banks, including depositors andborrowers."

"This responsible step is a signal indicating the government's capacityand resolve. The banking sector is especially important to the state, as itconstitutes the blood circulation of the national economy," Slakterissaid.

As a result of the government's decision, Parex Bank will become a daughtercompany of Morthage and Land Bank. The 51 voting shares in Parex Bank willbecome the property of Mortgage and Land Bank, and Parex Bank's owners ValerijsKargins 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 Mortgageand Land Bank

The prime minister said the government's decision was based on informationabout the bank's problems provided by the Finance and Capital MarketCommission.

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'sstability and liquidity.

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