Latvia says bank works normally after govt rescue

RIGA Nov 10 (Reuters) - Parex, Latvia's second-largest bank which the government took over at the weekend after a run of withdrawals, was working normally on Monday, officials said, though people continued to take money out.

Parex is the first victim of the global financial crisis in the Baltic states, where economic growth has also shrunk after years of double-digit expansion. Memories remain fresh of bank failures in 1995 and 1998.

There were no large queues at bank offices or cash machines after the government on Saturday announced the takeover of Parex, the largest locally owned bank and second largest in the country with assets of 3 billion lats ($5.43 billion).

"Normal bank operations are going on, the bank is working normally," Finance Ministry State Secretary Martins Bicevskis told Reuters.

Parex board member Liga Purina said people at the weekend had withdrawn a further 2 million lats, which she said was more than normal. A Latvian official said on Sunday people had last week withdrawn 60 million lats in the space of a few days.

Despite a lack of queues, Purina said withdrawals on Monday continued to be higher than normal.

"People can take out as much as they want, of course as a bank we would like them not to," she told Reuters.

Latvia's central bank is expected to give Parex an initial liquidity injection of 200 million lats, though more might be needed, depending on how much money people pull out.

Latvia said the takeover was necessary as the bank faced a liquidity crunch during the global financial crisis as people had lost confidence in it and were withdrawing deposits.

The government has said a key aim is to allow Parex to refinance syndicated credits due next year of 775 million euros ($991.6 million).

The state, via state-owned Mortgage and Land Bank, is to buy out Parex's two main shareholders, Valery Kargin and Viktor Krasovitsky, for one lat each ($1.81).

They are two of Latvia's top businessmen of Russian origin in a nation where a third of people are native Russian-speakers.

Another 34 percent of the bank would be given over to Mortgage and Land Bank as collateral. Another 15 percent of the shares would remain with minority shareholders. The government has said it sees no need to support other banks. (Reporting by Patrick Lannin; Editing by Erica Billingham)