Depositors can bank on 500 lats, but no more

RIGA - Latvia's law on bank deposits promises private depositors in Rigas Komercbanka that they will get up to 500 lats ($890) reimbursed to them no matter what amount they had on deposit if the bank has to liquidate. But that's the limit of the guarantee, even if the person has several accounts.

To get any money exceeding the 500 lats, private depositors will be told to go fish along with legal entities - companies, charities, schools, hospitals and nonprofit organizations.

Almost all the private persons with money deposited in Komercbanka took it out last fall, Bank of Latvia's Ilmars Rimsevics told reporters March 10

Kristaps Otersons, head of the Bank of Latvia's information department, said he doubts that anyone will get all their money reimbursed if the bank has to liquidate.

"The 500 lats is guaranteed by law, and Rigas Komercbanka can pay from the money it has without getting into the guarantee fund set up in October 1998," he said. "The remainder depends on how much Rigas Komercbanka can recover from creditors, from securities, from accounts receivable."

In October 1998, the government of Latvia set up a guarantee fund with 500,000 lats from the Bank of Latvia and a matching 500,000 lats from the state budget. After that, commercial banks fatten the kitty, paying a small percentage on their deposits. Likewise, the law provides that the guarantee fund increases until it covers the first 32,000 lats of deposits by private persons by the year 2008.

Meanwhile, RKB is scrambling to find another investor and has a promise from its major shareholder, European Bank of Reconstruction and Development, for help to get back on its feet. There had been no change in RKB's condition on March 15, but the situation is complex, Otersons said, involving creditors, shareholders, investors and potential investors.

RKB has not thrown in the towel, it declared in three languages on its Web site(www.rkb.lv). On March 9, RKB received written agreements from major investors on a restructuring plan, the statement said. "The agents of syndicated lenders, Fujii Bank and Landesbank Schleswig-Holstein have confirmed that they are willing to help resolve the bank's restructuring as soon as possible, and have offered a specific plan."

Even if the courts find RKB insolvent in a hearing scheduled for March 23, while assets remain frozen RKB would have a month to decide if it wants to resuscitate itself. If so, RKB can file a rehabilitation plan with the Bank of Latvia on which the central bank has 15 days to act. If the Bank of Latvia accepts the plan, it is up to the bank to decide how long before it can pay out reimbursements. Repayment schedules depend in that case on the bank's recovery of its health, Otersons said.

"I would not set a day for people getting money refunded, except to say that 500 lats is guaranteed for private persons."

They can bank on it, Otersons said.

"We don't see anything that can make big trouble in getting the money, because Rigas Komercbanka has it."