OREANDA-NEWS. April 21, 2011. Parex banka has accumulated nearly all funds necessary for repayment of syndicated loan, among them drawing in of Parex banka’s accrued reserves with the Bank of Latvia. Further holding of these funds in the mandatory reserves account has neither economic nor logical basis. In accordance with European Commission’s approved Restructuring Plan for Parex banka and the goals contained therein, repayment of syndicated loan without State aid is determined as priority of Parex banka’s present activity. The amount of loan is 164 million Lats, repayment term - 5 May 2011, reported the press-centre of Parex Banka.

“The essence of mandatory reserves is limitation of a credit institution's risk transactions however Parex banka has not been providing classical services characteristic to commercial banks since 1 August 2010 already. We are not a participant of the money market; restrictions posed by the European Commission which prohibit attraction of deposits and issuing of loans are binding to Parex banka,” points out Christopher Gwilliam, Chairman of Parex banka’s Board of Directors. 

As announced previously, aided by the State, on 1 August 2010 Parex banka became a unique financial institution, i.e. manager of specific problematic assets, in Latvia and the Baltic States and its sole aim is to recover State investments to the maximum extent possible. Presently Parex banka’s activity is focused on restructuring of loans, recovery of debt and management of overtaken assets.

“According to my international experience in bank restructuring which is more than 20 years long, I can say with full responsibility that holding Parex banka’s owned funds with the Bank of Latvia does not comply with the purpose of keeping mandatory reserves. Our mandatory reserves are calculated and accumulated largely on the basis of the bank’s liabilities toward the investments made by the Ministry of Finance and syndicated loan therefore the use of these funds for repaying the loan is a logical step,” emphasizes Christopher  Gwilliam.

Such a solution is permitted in the existing legislation and for this reason Parex banka has turned to the Financial and Capital Market Commission and the Bank of Latvia with a request to release it from performance of mandatory reserves requirements and to channel the funds in the amount of 26 million Lats accrued with the Bank of Latvia for repayment of the syndicated loan.