DJ EBRD To Take 25% Stake In Latvia's New Citadele Bank

RIGA, Latvia (AFP)--Latvia Thursday approved a 25% stake for the European Bank of Reconstruction and Development in Citadele bank, carved out of the troubled Parex bank, a Latvian minister said.

"Today we decided to further co-operate with the European Bank of Reconstruction and Development in the new Citadele Bank in which the EBRD will have 25%," Transport Minister Kaspars Gerhards said.

"With this, we are moving forward...Citadele will open for business on Monday," Parex chief executive Nils Melngailis said.

EBRD previously owned 19.7% of Parex, formerly Latvia's biggest bank whose 2008 state rescue forced the Baltic nation to seek a hefty international bailout.

Parex has been extensively restructured--some 66% of its capital along with more than 50 percent of its loan portfolio have been transferred to Citadele, which the government hopes to privatize in due course.

In November 2008, Latvia nationalized Parex, the Baltic state's largest locally owned bank, after depositors jittery about the country's deepening economic crisis began withdrawing their cash.

In March, the government announced plans to restructure Parex, saying it wanted to save the state from having to provide fresh capital to keep it afloat and also to stimulate lending in Latvia.

A new asset management company, trading as Parex, will meanwhile be tasked with selling its toxic leftover assets.

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July 29, 2010 09:42 ET (13:42 GMT)