RIGA - The European Bank for Reconstruction and Development (EBRD) has announced its readiness to support Latvian businesses with an estimated 200 million euros.
The money will come from the amount that development banks have earmarked for supporting Eastern European companies. In a bid to become a minority shareholder, about 100 million euro may go toward investing in Parex Bank.
After a meeting with Latvian Prime Minister Valdis Dombrovskis, EBRD Vice-President Varel Freeman said the money would be intended for industrial companies, producers, agricultural and energy companies, and textile manufacturers. The specific amount of the financing would depend on the needs of the company.
Freeman pointed out that the EBRD policy was to provide support to private businesses and aid in development. In 80 to 90 percent of cases, their cooperation partners were businesses.
At the end of February 2009, the EBRD, the European Investment Bank and the World Bank adopted a plan in which up to 24.5 billion euros could be lent to Central and Eastern European banks and businesses over two years to support operations.
Freeman said the EBRD was likely to announce its final decision regarding the acquisition of Parex bank shares in mid-April. The number of shares to be purchased also needs to be determined.
He said that after acquiring the Parex Bank shares, the EBRD would come forth with plans for revitalizing the bank and restoring its competitiveness.
Parex Bank CEO Nils Melngailis told the press it was important for the bank to have a new strong shareholder as it confirmed that bankers outside Latvia had confidence in the country's growth.
Melngailis explained that having EBRD among its shareholders would make it easier for Parex Bank to raise funds on the financial market once it had recovered.
Melngailis said an EBRD representative would certainly be included in Parex Bank's council to help with strategic decisions that had already been discussed with the EBRD.
"The EBRD will be an active shareholder," said Melngailis.
The EBRD may also help arrange financing for Parex Bank from other foreign banks.
Melngailis said earlier that the EBRD could acquire up to 25 percent of Parex Bank shares.
Currently 84.83 percent of Latvia's second largest bank, Parex, is owned by the Latvian state. Parex sought government assistance to stave off financial trouble last year. To support the troubled bank, the Latvian government decided to take over a controlling stake at the end of 2008.