The future of Komercbanka uncertain

  • 1999-08-12
  • By Diana Kudayarova
RIGA - Komercbanka has to be revitalized, the state decided, and set up the SIA Rigas Komercbanka Rehabilitation Agency. One million lats ($1.7 million) needed for Komercbanka's revitalization have been allocated to the Finance Ministry. But it's not party time for the bank administration just yet.

The Parliament allocated the rehabilitation funds into the budget for unforeseen events, earmarking it for Komercbanka, but leaving the final decision up to the Finance Ministry. Now that the question of the pension law referendum has come up, there is a contestant for the million lats meant for the bank in trouble. This exact sum is necessary to finance the referendum.

"It is very incorrect on the part of the finance minister to try to confront the bank's depositors with the pensioners," said Imants Burvis, MP from the Latvian Social Democratic Workers Party faction.

Bank of Latvia Vice President Ilmars Rimcevics also expressed hope that "revitalization of Komercbanka will not be linked with the question of pensions because the question of Rigas Komercbanka will help to solve the budget situation in general." He suggested that the government must be able to find a way of solving the problem.

Yet there is no way to fund both, Finance Ministry spokeswoman Baiba Melnace said. The referendum must be funded from the unforeseen events budget, which currently consists of 700,000 lats - a sum which will no doubt be claimed by other applicants before long. Finance Minister Edmunds Kastins claims that if 1 million lats is spent on the referendum, he does not see any source of financing for Komercbanka.

Time is running out: the Bank of Latvia set Aug. 14 as a deadline for the bank's revitalization, and that date is approaching too fast to introduce another set of amendments into the budget and to try to find money for the bank. If revitalization is not realized by Aug. 14 Komercbanka will be declared bankrupt - unless the term is extended.

Latvian MPs are in favor of giving Komercbanka another chance.

"The government should help the troubled commercial bank if it is possible, because it is in the interests of both depositors and the credit resource market," said Imants Kalnins, For Fatherland and Freedom/LNNK faction leader.

Latvia's Way faction MP Antons Seiksts claimed that "the argument does not sound too convincing, that a needless referendum could be the reason for the government not to participate in the rehabilitation of RKB." He also pointed out that the losses from paying Komercbanka's depositors will exceed the million lats needed for its bailout.