Parex’ action OK’d

RIGA - Parex Bank, the Latvian lender that had to be rescued by the state in 2008, reached a “satisfactory accommodation” with the central bank over the use of its obligatory reserves, said Chairman Christopher Gwilliam. “It’s obvious from what’s in the public domain that we’ve negotiated with the national bank and I think we’ve come to a satisfactory accommodation,” Gwilliam said in an interview in Riga on May 31, adding that details of the discussion are confidential, reports Bloomberg.
“At the moment, we do not expect to be penalized for using our own cash for making the syndicated-loan repayment.”

The lender on May 3 used 23 million lats (32.8 million euros) of reserves it had previously held at the central bank to make a final 164 million lats payment of syndicated loans, in total worth about 770 million euros, that were rescheduled after the state took over Parex following a run on its deposits.

Latvia was forced to turn to a group led by the European Union and the International Monetary Fund for a 7.5 billion euro loan package after the takeover of Parex, then the country’s second-biggest bank.
Parex’s performing assets were split from the lender and placed into a new bank called Citadele, which the state plans to sell. Parex plans to sell off assets until 2017 to return around 400 million lats to the state as prices recover.
The Latvian central bank initially said that allowing Parex, which contains only non-performing or distressed assets and makes no loans, to avoid fulfilling the obligatory-reserve requirement would be “breaking the law.”

Central bank spokesman Martins Gravitis said the bank cannot comment at the moment on individual credit institutions.
The European Central Bank allows lenders or institutions that are in “winding-up proceedings” authorized by a judicial or competent authority to be exempt from obligatory-reserve requirements.

Parex still has a banking license since “there is no legislation that automatically allows us to give it up,” Gwilliam said. “At the moment we stay as we are. We are working on solutions. The biggest challenges now are to make sure that we continue our work to ensure that we gain the best value for our assets.”

Some of the assets in Parex may have involved “the misuse of money,” he said without elaborating.
“It’s our responsibility on behalf of the state to investigate any possible avenues of mismanagement or any other malfeasance, wrongdoing in order to maximize the recovery,” Gwilliam said.

Latvian President Valdis Zatlers on May 29 initiated the first referendum in the country’s history for new parliamentary elections seven months after the legislature came into power. The referendum, which will contain no minimum threshold for turnout, will be held on July 23, and could lead to new parliamentary elections two months later.

“Now, there is a little bit of political turmoil as well, there are various debtors that we have that may see this as being somehow to their advantage and may redouble their efforts to be, let’s say, uncooperative,” he said, without specifying which debtors.