Parex Banka, the largest independent Baltic bank, has been taken over by the Latvian government to prevent a financial crisis that could have wrecked the fragile Baltic economies. Parex, Latvia’s second largest bank with 3.1bn lats ($5.6bn) in assets, was forced to seek protection from the state after clients panicked and it lost 60m lats in deposits at the end of last week. Ilmars Rimsevics, governor of the Latvian central bank, said the move was an “attempt by the Latvian authorities to step in earlier rather than later.” Parex’s liquidity crisis will heighten fears that the Baltic states will be forced to join Hungary and appeal to the EU and IMF for help in the current global financial crisis. Latvia and Estonia are already in recession, with Lithuania expected to join them next year. All three are seen as vulnerable because of their wide current account deficits and high gross external debt.

This entry was posted by Gwen Robinson on Monday, November 10th, 2008 at 5:11 and is filed under Capital markets. Tagged with Latvia, Parex Banka. Edit this entry.