Paritate's fate hangs in the balance

RIGA - Following the Bank of Latvia's June 25 decision to suspend the activities of Paritate Bank, an insolvency hearing has been scheduled for July 17.

On June 28 the Riga District Court appointed Lauris Liepa to be the bank's provisional administrator. He said the bank's situation would become clear over the next few weeks.

"The owners are very enthusiastic and have given me their full cooperation. I have good hopes I will achieve the bank's rehabilitation."

Janis Brazovskis, deputy chairman of the Finance and Capital Market Commission, which on July 1 took over the monitoring of credit institutions from the Bank of Latvia, said that on June 25, Paritate's capital was minus 3 million lats ($4.7 million). Liepa declined to comment on a written statement to the media by businessman Vladimirs Ostrovskis - the owner, according to the register of enterprises, of a 95 percent stake in Paritate - which said the bank's losses had been incurred on the U.S. securities market.

At the end of 2000 the bank posted losses of 2.8 million lats and had a registered capital amounting to 2.95 million lats.

Roberts Idelsons, managing director of the brokerage firm Suprema, said Paritate's problems stemmed from "miscalculations" by management and did not signal the beginning of a trend among Latvia's small banks.

"This situation has resulted from the bank making bad loans and the willingness of its shareholders to take risks on the U.S. equities market, which is not performing well.

"But so long as Russia allows its citizens to deposit money in Latvia there will continue to be a place for such banks. It is not expensive for strong industrial groups to support a small pocket bank and I don't see mergers or acquisitions ahead."

With the establishment of the Finance and Capital Market Commission, Latvia's banks are now under closer scrutiny. Uldis Cerps, the commission's chairman, said Latvia's laws relating to credit institutions and the prevention of money laundering now meet international standards. A unit of the prosecutor general's office now monitors transactions of more than 40,000 lats. "Latvia is in line with European Union member countries," said Cerps.