Parex Banka was founded in 1992 by Valery Kargin and Viktor Krasovickis as a privately owned full-service banking company in Riga, Latvia. Its services were marketed both locally and to international clients in both the West and Russia.
Much of Parex's lending took place within the Baltic states, leaving it relatively insulated from the 1998 Russian financial crisis. The years immediately after Estonia, Latvia, and Lithuania joined the European Union in 2004 brought an influx of foreign investment, leading to an overheated economy, unsustainable economic growth and a real estate bubble which burst during the financial crisis of 2007–2010. The September 15, 2008 failure of US bank Lehman Brothers led to a sharp drop in liquidity and international investors began to withdraw assets.
51% majority control of Parex was purchased from the two founders by the Latvian government on November 8, 2008 for a token consideration of 2 Latvian lats. The government later enlarged its stake in Parex by buying out other stockholders for a token €0.01/share, then split the institution into good and bad banks:
- Citadele banka was spun off on August 1, 2010 as a good bank
- The remaining troubled assets remained with Parex Banka, which became asset management company Reverta in 2012.
The total direct and indirect cost to the Latvian government is estimated at more than a billion dollars, making it a factor in a 2008–2010 Latvian financial crisis which forced the state to borrow money from the International Monetary Fund and the European Commission to cover a balance of payments deficit.
- Baltic states housing bubble
- 2008 Latvian financial crisis
- Latvia#Economic contraction and recovery (2008–2012) and Austerity#Latvia
- "Parex" bank collapse, Baiba Rulle, IR magazine, 2012/2/23
- Parex bank's correspondence reveals a hidden message volume, L. Fox, 19.01.2011.
- What's going on under the guise of official secrets Edgar Paul, 29/06/2014.
- Latvian Bank > Press > Commentary and articles > Parex takeover
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