The European Commission today approved state aid provided to Latvia's second-largest bank, concluding that the emergency help provided by the Latvian government to JSC Parex Banka complied with the EU's rules state support because it was proportionate to its needs and the economy's and because it would be available for only a limited period.
The Latvian government, which informed the EU executive of its plans on 10 November, will guarantee the bank's existing and new loans, provide capital for a year to support the bank's liquidity needs, and will give it subordinated loans to strengthen its capital base.
JSC Parex will have to pay fees for the support provided by the state and will face limits on the growth of its balance sheet, on its marketing efforts and on new business.
In all, the support provided by the state, which has now taken a 51% stake in the company, is valued at roughly €286 million.
Separately, the EU said on 23 November that it was standing by to provide macroeconomic assistance to Latvia together with assistance from the International Monetary Fund (IMF). Latvia's finance minister, Atis Slakteris, said today that it may ask the IMF for as much as €3 billion.
