For this to happen, all parties involved in Ko-mercbanka's rehabilitation have to stick to the plan that has been worked out. "If all the participants involved adhere to their initial commitments the bank will be reopened with a real positive capital. But if any of the participants of the plan backs out, RKB will not be reopened at all," the president of the Bank of Latvia,Einars Repse, said.
Once the bank is opened, no restrictions will be placed on its operations and it will be left to its own devices to find its place again in the financial market. Kellaker is considered by the central bank to be a good person to insure that it happens. According to Bank of Lat-via's Vice President Ilmars Rimsevics, Kellaker made a great contribution to the implementation of the rehabilitation plan and is well informed of the strengths and weaknesses of the bank, as well as of its prospects in the current situation.
Within the next several days Komercbanka's court appointed administrator, Gundars Cers, should apply to the central bank with the request to confirm Kellaker as the bank's new president. The bank will be able to resume its operations in a few days after the court resolution is passed on that matter, which may take up to two weeks.
"Our main concern is to restore the confidence of the customers and to open a healthy bank instead of a sick bank, where people do not want to deposit their money," Rimsevics said.
Time will show whether Komercbanka, which used to be the fifth largest bank in Latvia until it was hit by the Russian crisis, can regain long lost customer confidence and market share.
According to Rimsevics, many private depositors already withdrew their money from the bank in the fall of 1998, although at that time no official information was available about the bank's pitiful condition. As was clarified later, Komercbanka had negative capital and reserves by the close of 1998.
During the first third of 1999 the bank made a loss of about 2 million lats ($3.39 million), Cers confirmed. At that time the bank had a net total of credits of 20.77 million lats plus 38.81 million lats on deposit for total assets of about 51.8 million lats.
The bank's situation was such that it had to postpone its annual meeting with shareholders from Dec. 22 until Feb. 18 to allow consultants and investors to draw up a new business plan for potential investors.
Komercbanka, more heavily involved with Russia than other banks, had 27 percent of its assets tied up in Russian T-bills when they became worthless. Incurred losses left it with liabilities which exceeded its assets.
The doors of the bank shut on March 7 when the central bank suspended Komercbanka's operations. The Riga Stock Exchange stopped trading of Komercbanka shares on March 8 while the central bank filed a claim in a Riga district court to have the bank declared insolvent.
On March 9 Komercbanka received written agreements from major investors on a restructuring plan. Fujii Bank and Lan-desbank Schleswig-Holstein confirmed that they were willing to help solve the bank's problems and suggested a specific plan for doing so. On March 23 the bank was declared insolvent.
"Despite that Rigas Ko-merc-banka was declared insolvent, we are not giving up," said European Bank for Reconstruction and Development first Vice President Charles Frank. "We are continuing to work with the government, the central bank and the largest creditors to identify possible solutions."
"We may not succeed, but we'll try. It's going to be very hard to succeed, there is not much time left, but I can assure you that none of us will give up," Frank said on March 24.
On April 30 the bank obtained the final required signature to the rehabilitation plan, that of an eight-bank syndicate headed by Fujii Bank. Cers submitted the plan to the central bank for approval. It was then believed that the bank would reopen at the end of June or first part of July.
Based on approval of the reorganization, the Bank of Latvia pledged to capitalize part of a loan by 15.5 million lats, which signaled its desire to approve the rehabilitation. The EBRD likewise pledged $9 million and the Latvian government 1 million lats for shares that it will liquidate when the price is favorable. Large investors agreed to convert bank debts into capital or shares.
The future of Komercbanka was put on hold when the money promised by the Latvian government was deemed necessary to organize the referendum on pension law amendments. In the end the extra funds were provided by the Bank of Latvia.
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