Brussels, 29/07/2009 (Agence Europe) - On Tuesday 29 July, the European Commission opened an in-depth investigation into state support measures for the Latvian JSC Parex Banka. The investigation will evaluate whether the bank's restructuring plan, presented by the Commission last May, justifies the aid granted to Parex since November last year. In a press release published on Wednesday, the Commission explained that “the opening of an investigation is normal when there is public intervention in the banking sector”. Parex Banka is the second largest bank in Latvia in terms of assets. It is a universal bank offering the full range of banking products directly and through specialised subsidiaries. A rescue package for Parex in the form of state guarantees, liquidity support and a recapitalisation measure was approved by Commission decisions of 24 November 2008. On 11 May, the Commission approved the changes introduced to the recapitalisation plan for enhancing the bank's equity base.
According to Community legislation, a bank that benefits from state aid must refund it within six months or be subject to restructuring. Subsequently, in line with the Commission's decision on the rescue aid, Latvia notified on 11 May 2009 a restructuring plan for Parex. The plan includes the implementation of a new business strategy as well as a number of restructuring aid measures consisting of liquidity support, prolongation of state guarantees, potential new state guarantees to ensure further funding of the bank and capital injections. The in-depth investigation will cover all the abovementioned measures and assess whether they are likely to restore Parex's long term viability. It will also evaluate whether state aid is limited to the necessary minimum and whether the proposed measures limiting possible distortion of competition comply with the distortion created by the aid. (C.D./transl.rh)