BRUSSELS Aug 10 The European Commission on
Friday approved changes to a restructuring plan for partially
nationalised Latvian bank Parex allowing its successor, Citadele
bank, to increase lending operations.
Latvia's government rescued Parex in 2008, after
the global financial crisis hit its business. This in turn led
Latvia to apply for a 7.5 billion euro ($9.23 billion) bailout
from the International Monetary Fund and the European Union.
Citadele bank was formed in 2010 as a "good bank,"
collecting the sound assets of Parex under a less risky model
focused on domestic and Baltic operations.
Friday's changes amend the Commission's 2010 state aid
approval for Citadele, adding a buffer to the bank's minimum
capital requirement, and allowing it to carry forward unused
amounts from previous years' lending caps.
The Commission said that the changes took into account the
"changing nature of regulatory requirements and a slow start of
lending operations by Citadele after its creation".
Citadele returned to profitability in 2011, and repaid fixed
term deposits to the Latvian government in February this year,
saying that it was now deposit-funded by clients.
Parex bank, which was Latvia's second-largest bank and the
only large one owned by local capital, was left to continue as a
"bad bank" containing impaired assets.
Seventy-five percent of Citadele shares are owned by the
government while 25 percent plus one share belong to the
European Bank for Reconstruction and Development.
The Latvian government plans eventually to sell Citadele
when market conditions permit.
($1 = 0.8124 euros)
(Reporting By Ethan Bilby; Editing by Helen Massy-Beresford)