IN NOVEMBER, A presentation appeared on Latvian bank Parex’s website entitled ‘The leading independent bank in the Baltics’. Its timing was unfortunate.
Just days later, on November 7, the bank applied for support from the government following a run in which 12% of total deposits had been withdrawn since October 1. Latvia’s government acted immediately. The following day it announced that Parex, the Baltic republic’s second-biggest bank, had been nationalized after state-owned Mortgage and Land Bank acquired 51% of its shares. In addition, the government provided a liquidity injection and a guarantee for €775 million of syndicated loans that are coming due next year.
Even with these moves the bank’s future looks precarious. Resident and non-resident deposit outflows continue, according to Fitch Ratings, and the chairman of Mortgage and Land Bank has suggested that the government needs to inject at least...
