ogresdēls et al.,

“If my memory has not failed me, Parex bank was one of the banks that refused the US request to terminate large foreign personal accounts . The sanctions for such refusal was the limitation on access to US banks. Could this have been a factor in the “systems failure”? Were not the correspondent banks for Parex located “East”? Just curious! Maybe Ojars can shed some light on the issue.”

The only time I was refused service in Latvia because I did not speak russian happened a few years ago at Parex bank. I shrugged my shoulders and took by business elsewhere. I did take notice that Parex bank had considerable activity in Russia, and also had considerable financial transactions emanating from sources in Russia. It was interesting to note a present day comment by Kargins that he was not receiving a salary from the bank( this would leave him out of the chain of responsibility at the bank), and that the government put a “hold” on all his personal assets. And suddenly some of his previous assets resurfaced as not really being his at all. The Parex Bank was a significant conduit of Russian influence on business undertakings in Latvia.

Now, by design or coincidence, this “conduit” will be controlled indirectly by the Bank of Latvia.

Visu labu,

Ogresdels -

I’m aware of FinCEN actions taken by the US Government against VEF banka and Multibanka (since withdrawn), but don’t know of that type of action against Parex specifically.

http://www.delfi.lv/news/national/business/article.php?id=22522570
SVF pieprasa Kargina un Krasovicka izslēgšanu no ‘Parex Bankas’ valdes
http://www.DELFI.lv
30. novembris 2008

Starptautiskais Valūtas Fonds (SVF) pieprasījis no “Parex Bankas” jaunās valdes izslēgt tās agrākos vadītājus Valēriju Karginu un Viktoru Krasovicki, svētdienas vakarā vēsta raidījums “Nekā personīga”.

Atsaucoties uz fonda amatpersonām, raidījums norāda, ka SVF uzskatot, ka Kargins un Krasovickis esot vainīgi “Parex Bankas” finanšu problēmās. Kā atbildes gājienu abi baņķieri esot veicinājuši baumas, ka viena no SVF prasībām finansiālas palīdzības sniegšanai Latvijai esot lata devalvācija, tādējādi diskreditējot pašu fondu.

Valery Kargin is Latvia’s richest person and Viktor Krasovitsky is right behind him.  The following is from a recent article about the Parex Bank takeover, just a couple of sentences of intro to the two, but the previous article in Latvian is the update to their downfall, such as it is. 

http://bbn.ee/Default2.aspx?ArticleID=e68bc887-dc98-4cf0-8941-3439fff7d373
Laws of the game for Parex bank
Kaja Koovit
11.11.2008

/..../
Mortgage Bank is acquiring Parex Bank controlling interest (51 pct), which previously belonged to the richest people in Latvia Valery Kargin and Viktor Krasovitsky.

Properties of Parex Bank shareholders Valery Kargin and Viktor Krasovitsky, their expensive residences in Jurmala can remain untouched as officially they belong to others.[bold mine]
/..../

http://www.guardian.co.uk/business/feedarticle/8110208

Latvia’s Rietumu sees no syndicated credit problems

  * Reuters, Tuesday December 2 2008

* Bank president says debts covered by liquidity
* Says bank has borrowed carefully
* Rival Parex nationalised after liquidity troubles
By Patrick Lannin
RIGA, Dec 2 (Reuters) - Latvia’s Rietumu Bank, in which Irish billionaire Dermot Desmond has a stake, has no problems repaying syndicated loans, the head of the bank said on Tuesday, as worries continued over nationalised rival Parex.
“We are one of the least indebted banks in the region,” Rietumu Bank President Alexander Kalinovski told Reuters, saying the bank’s policy had been to borrow carefully in the past.
Though sixth-largest bank overall in terms of assets, Rietumu is the second-largest non-Nordic bank after Parex.
The government decided last month to take over Parex to save it from bankruptcy and help it win agreement to roll over the syndicated credits. Earlier on Tuesday the bank supervisor slapped limits on withdrawals at Parex to stop outflows of funds.
One reason Parex hit trouble was 775 million euros of syndicated loans due next year.
“The situation is that even if we had to repay all our syndicated loans tomorrow our liquidity would allow us to do it without resorting to extraordinary measures,” Kalinovski added.
He said Rietumu had a 44 million euro syndicated credit due in December, for which money had already been reserved.
A one-year loan of 75 million euros was due in August next year and he said it was too early to say whether the bank would refinance or repay, depending on credit markets at the time.
A 120 million euro loan is due for repayment in June 2010.
Kalinovski said Rietumu, which like Parex counts many non-residents as clients, had seen no loss of customers in the wake of the problems at its rival and that strong banks would emerge stronger from the crisis.
Last month Rietumu said net profit for the first 10 months of 2008 was 27.6 million euros, including 3.7 million earned in October. It had assets of 1.7 billion euros and deposits of 1.1 billion.
Rietumu’s main owners are founders Leonid Esterkin and Arkady Suharenko as well as Desmond’s Boswell International Consulting Ltd. Other top banks in Latvia, particularly those most active in the retail sector, are Nordic groups Swedbank, SEB and Nordea.
Kalinovski said Parex’s problems had caused worries among clients of Latvian banks, but he saw the country remaining an important player.
Latvia, a country of 2.3 million people, has 24 banks, many of which are aimed at servicing clients from Russia, other CIS countries and eastern Europe, particularly related to the business of transit trade from east to west.
“Latvia is de facto a regional financial centre and I see no reasons why it should stop being such a centre,” he said.
(Reporting by Patrick Lannin; Editing by Jon Loades-Carter)

Latvian government taking over Parex?  Why should Latvian taxpayers be held responsible for the mistakes of Kargin and Krasovski?

Kargin and Krasovski didn’t make mistakes, they made money and
now tey can keep it.
If the taxpayers don’t like it….....................boooooooooooooooooooooo!!!!!!!!!!!
Just like in Ameerika.

oops….......just in: the boys have to give up their stock options. Whatever…........

No, it’s not all the same in the world of corruption.
Transparency International 2008 Corruption Perception Index
http://www.transparency.org/news_room/in_focus/2008/cpi2008/cpi_2008_table

1.  Denmark
27. Estonia
33. Israel
52. Latvia (drop from 51 in 2007)
58. Lithuania (drop from tie with Latvia at 51 in 2007)
96. Gabon
134. Pakistan
147. Russia
177. Haiti
180. Somalia

spectator - 02 December 2008 04:57 PM

Latvian government taking over Parex?  Why should Latvian taxpayers be held responsible for the mistakes of Kargin and Krasovski?

Let’s not project the US here. Parex is only the second-largest bank by assets and the largest bank by deposits. State run companies like Latvijas Valsts Mezi for example have accounts there. Should they too get a state guarantee of only 50,000 if the bank fails?

More problems ahead for Messrs. Kargins and Krasovickis.

From DELFI:

“Parex bankas” bijušie akcionāri Valērijs Kargins un Viktors Krasovickis katrs bija aizņēmušies “Parex bankā” 28 miljonus latu un šo summu ieguldījuši atpakaļ bankā kā savu depozītu ar peļņu 36% gadā, svētdien ziņo TV3 raidījums “Nekā personīga”, norādot, ka ceturtdien šis līgums ar Krasovicki un Karginu lauzts.”

Visu labu,

So what does this all mean? When you say Kargin and Krasovickis, do you mean, Russian and Russian?

http://www.businessweek.com/globalbiz/content/dec2008/gb2008125_793417.htm?campaign_id=rss_eu
BUSINESS WEEK Eastern Europe December 5, 2008
Latvia Bank Failure Dashes Hopes
Parex Banka dates back to Soviet days. Its collapse in November was a blow to Latvia’s ambition to be a financial nexus between East and West
By Pauls Raudseps
Bear Stearns. Lehman Brothers. Dexia. Fortis. Parex…

Latvia’s second biggest bank has joined the list of institutions humbled by the worldwide financial crisis and added to the burden of Latvia’s suddenly shrinking economy and buckling state finances.

A small player on the international scene, Parex has an outsized reputation not only in Latvia, but in the wider world of the former Soviet Union. Two former Latvian Komsomol (Communist Youth League) functionaries – Valerijs Kargins and Viktors Krasovickis – secured one of the first licenses to run a foreign currency exchange in the USSR even before Latvia was completely independent. Their exchange kiosk in Riga’s central railway station grew into a bank with 3 billion lats ($5.4 billion) in assets and branches in 14 countries.

Kargins and Krasovickis did not hesitate to use the connections they had made in the communist nomenklatura during the waning years of Soviet power and worked to solidify their political influence after Latvia regained its independence. Two former prime ministers have been members of their advisory council, a former prosecutor general sits on the board, and their connections almost undoubtedly played a significant role in building their business in the 1990s. Kargins was widely considered one of Latvia’s “oligarchs” – the handful of people whose position at the nexus of business and politics let them amass large fortunes and outsized political influence.

But at 10 p.m. on Saturday, 8 November, it all collapsed. After a closed meeting of the cabinet lasting four hours, Prime Minister Ivars Godmanis emerged to announce that the government was purchasing 51 percent of Parex’s stock for 2 lats – one for Kargins and one for Krasovickis. The remaining 34 percent that the two owned would be pledged as security to the government to guarantee against any losses in case the financial condition of the bank was worse than reflected in its official balance sheet. As this article went to press, the government was considering taking over that share as well.

Fifteen percent owned by various minority shareholders would remain untouched. It was quite a comedown for Kargins and Krasovickis, who had rejected an offer to sell Parex for something like 1 billion euros at the beginning of the year. What happened?

A FAST FALL

Parex was well-known for attracting depositors from the former Soviet Union for whom Latvia was emotionally still the sovetskaya zagranitsa, the “Soviet abroad” – a place that was relatively easy to get to, where people spoke Russian, yet that provided the legal structures of a Western country and protection from the predatory practices of their own governments. In the early 1990s Parex played on this image, running advertisements on Russian television with a tagline that was as good as a nudge and a wink: “We’re closer than Switzerland.”

Later, as the U.S. Treasury Department became increasingly aggressive against money laundering, Parex’s owners did not like to be reminded of this wily slogan, yet they never gave up their focus on attracting money from the East. The bank was the model for the kind of business that many hoped would make Latvia a regional financial center, a “bridge” between East and West.

As long as the commodities boom was generating massive amounts of cash for Russia, Ukraine, and points beyond, and Latvia maintained its position as the fastest growing economy in the European Union, this strategy for attracting funds and making money seemed like a winner. But, as for so many others, the global financial crisis that followed the collapse of Lehman Brothers in mid-September upended Parex’s position.

To save their banking industries, one European government after another extended large aid packages, but no help was forthcoming for local banks from the Latvian government, which was struggling to make budget cuts in the face of a massive economic slowdown (GDP fell 4.2 percent year on year in the third quarter of 2008, the sharpest decline in the European Union). Parex was also vulnerable because of two loans put up jointly by more than 60 banks, worth 775 million euros, which will come due in 2009.

In the worsening financial environment, it was not clear that the bank would be able to roll them over, as it could have just a year ago, and doubts about its ability to repay the loans began to create anxiety both in the bank and among its larger foreign depositors. And when the Swedish government announced on 21 October that it would provide a large support package for its banks, local depositors in Latvia also had a much safer alternative to Parex, as the first and third largest banks in Latvia are subsidiaries of the Swedish banks Swedbank and SEB.

Parex started hemorrhaging cash. According to the Latvian bank regulator, in the six weeks before the government takeover the bank lost 240 million lats ($427 million) in deposits. In the first week of November its liquidity ratio (how much cash a bank has available to cover short-term liabilities such as deposits) was only slightly above the 30 percent minimum required for the bank to be considered solvent.

Parex, with more than 500,000 clients (in a country of 2.3 million) and assets close to 20 percent of the country’s GDP, was manifestly too big to fail. So on 8 November the government stepped in and promised to inject 200 million lats into the bank and guarantee any loans the bank had to take out in order to restore liquidity.

[cont’d]

do you think a link would have sufficed?

[cont’d from above]

SHAKEN CONFIDENCE

Domestically the government’s move seems to have worked. The run on Parex leading up to the takeover had involved large depositors pulling their money out. The population as a whole was largely unaware of the potential problems at the bank and, to everyone’s relief, reacted calmly to the government’s Saturday night surprise.

The same cannot be said of international observers. With the government already struggling to control a budget deficit and the economy steadily worsening, in the following days Fitch and Standard and Poor’s cut Latvia’s credit rating and threatened further downgrades, potentially putting Latvia’s bonds over the line separating investment grade from junk. The government is talking with the banking groups that lent the joint loans, hoping to convince them to roll them over, but the complex talks are not progressing quickly.

As a result, less than two weeks after taking over Parex, on 20 November, Latvia began negotiations with the International Monetary Fund on an aid package to preserve the stability of its financial system. The fiscal discipline that the IMF is sure to impose on the imploding state budget, while necessary, will increase the pain of a recession that started this summer and is expected to continue for most of next year.

It is more than a little ironic that this crisis has been given such a powerful push by the very business model that many saw as Latvia’s road to rapid economic growth. Perhaps being closer than Switzerland is not such an advantage after all.

Aleksejs et al.,

“So what does this all mean? When you say Kargin and Krasovickis, do you mean, Russian and Russian”.

I know that Kargins is russian, but I do not know about Krasovickis.

Tell you what it means though:  You lend me lets say 10,000 Ls at 1% interest, and I lend it right back to you and you pay me 38% interest.

Visu labu,