Brussels, 23/12/2008 (Agence Europe) - On 23 December 2008, the European Commission approved a Latvian support scheme to provide guarantees to banks to ensure their financing. The Commission's analysis showed that the scheme's time and scope restrictions and non-discriminatory access criteria mean that it complies with EU rules. The Commission also believes that the remuneration demanded in return corresponds to market conditions for similar guarantees.
The Latvian guarantees can apply to any debts (liabilities) apart from interbank deposits, subordinated liabilities and collateralised liabilities. Debts are called subordinate when they are not priority (in other words, in the event of bankruptcy of a debtor and liquidation of its assets, subordinated debt is reimbursed after other debt, assuming there is any money left over). Collateralised debts are structures created by banks to group together bundles of debts that are then sold off to investors depending on the level of risk involved. Experts say the financial crisis was sparked by this bundling of debts and the concentration of financial risks involved.
The programme is restricted to solvent banks (including non-Latvian banks established in Latvia) with a total budget of up to 10% of Latvian GDP. After six months, the scheme still have to be wound up or notified to the European Commission again. The non-confidential versions of the Commission's decision will be published online under reference number 638/2008. (C.D. trans fl)