| People in Latvia should not worry about stability of banks - experts |
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| Monday,November 10,2008 Posted: 15:05 BJT(0705 GMT) |
| From:Baltic News Service Article type:Original |
RIGA, Nov 09, BNS - Even though the Latvian government on Saturday decided to bail out the ailing Parex Bank, second largest bank in Latvia, residents have no grounds for concerns about stability of banks, said experts.
Economist Roberts Remmes told BNS that the government's decision to acquire a controlling stake in Parex Bank should reduce residents' concerns about the stability of the banking system.
He said that the present situation is totally different from the banking crisis in the 1990s. At present the sum of the minimum guaranteed deposit is much bigger -- 50,000 euros, and, in his words, there are not many people in Latvia having larger deposits than the guaranteed sum.
Remess also said that the government with its decision has shown that, as opposed to the crisis in the 1990s, the state is helping banks with the economic and financial troubles.
Prudentia partner investment banker Girts Rungainis told BNS that residents should not worry about safety of their deposits.
"I would like to believe that this government step should have a positive impact on residents," he said, adding though that "people are irrational".
He said that Parex Bank as the second largest Latvian bank is a systemic bank and the government's decision not to help it might have caused a crisis in the banking system in Latvia. Therefore, the government's present decision to bail out the bank is a positive signal.
He also underscored that smaller banks have smaller deposits, but there are no doubts about stability of the largest Latvian banks after the government's decision on Saturday.
The government on November 8 decided to take over the controlling stake in Parex Bank through Latvia's Hipoteku un Zemes Banka (Mortgage and Land Bank). A representative appointed by the Latvian government is to replace Valerijs Kargins as CEO of Parex Bank.
As a result of the government's decision, Parex Bank will become a daughter company of Mortgage and Land Bank. The 51 voting shares in Parex Bank will become the property of Mortgage and Land Bank, and Parex Bank's owners Valerijs Kargins and Viktors Krasovickis will be paid a total of two lats (EUR 2.8) for the shares.
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