Commission approves Latvian support for JSC Parex Banka

11 May 2009

Latvia proposes to strengthen the bank's capital basis with the aim of achieving a capital adequacy ratio of 11% by issuing ordinary shares, qualifying as Tier 1 capital and subordinated term debt qualifying as Tier 2 capital.

The Commission approved amendments to the original recapitalisation measure of the Latvian JSC Parex Banka. Under the proposed changes, Latvia would acquire newly issued ordinary shares and subordinated term debt.

 

In particular, Latvia proposes to strengthen the bank's capital basis with the aim of achieving a capital adequacy ratio of 11% by issuing ordinary shares, qualifying as Tier 1 capital and subordinated term debt qualifying as Tier 2 capital. The state would purchase these against adequate remuneration.

 

In particular, the remuneration of the Latvian state for the bank's recapitalisation would be based on the European Central Bank recommendations, taking into account the real costs of state treasury loan funds, an adequate risk premium and a fee. Moreover, the Latvian supervisory authority confirmed that the value of the capital injection corresponds to the minimum necessary to keep JSC Parex Banka in business until it can restructure. Furthermore, the state committed to exit JSC Parex Banka's Capital in the medium term. Finally, Latvia remains committed to submitting a restructuring plan for the bank shortly.

 

Press release

 

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