EBRD buys stake in Rietumu Banka

Ending two years of negotiations, the European Bank for Reconstruction and Development has finally decided to acquire 20 percent of Rietumu Banka.

The investment will enable Rietumu Banka, Latvia's fourth largest by assets, to strengthen its banking operations, develop its network and increase lending capabilities to its corporate customers in Latvia.

"One of the key issues [of the sale] is the benefit to our clients," said Rietumu Banka President Michael Bourke.

The 7.9 million lat (13 million euro) deal, which will still have to be approved by Rietumu Bank's shareholders and Latvia's Finance and Capital Market Commission, would be the largest investment by the EBRD in a Latvian company.

According to Rietumu Banka, it could be completed by the second-quarter of the year.

"EBRD is very big in the CIS, and not only in the banking industry, and they bring a lot of knowledge and expertise," added Bourke, who is positioning Rietumu Banka to conduit Western funds into CIS countries such as Belarus and Ukraine.

EBRD "will consolidate further our base in the Baltics and give us a chance to look for other opportunities," he said.

Indeed, current shareholders of the Latvian bank have said that they hope Rietumu Banka will stand on the same level as Europe's banks and will benefit from EBRD's experience, influence and contacts in Central and Eastern Europe, especially while expanding into Russia and CIS countries.

Currently the EBRD has some 353 million euros of investments in Latvia. The bank, which was set up in the early 90s to help the transitional economies of Eastern Europe, is strategically geared toward boosting the private sector and infrastructure development before Latvia's accession to the EU in 2004.

Rietumu Banka has more than 500 employees and has been operating on the financial market for more than nine years. It merged with Saules Banka in 2001.

By acquiring one-fifth of Reitumu, the EBRD will get one seat on the bank's council.