Company

For Media

Dec 28, 2011
The extraordinary meeting of Parex banka shareholders passes a resolution on change of the Bank’s status

Today, December 28, 2011, in compliance with the previously announced agenda, the extraordinary meeting of shareholders of joint stock company Parex bankapassed a resolution on giving up the credit institution operating licence issued to Parex banka and as a result of the status change to amend the Articles of Association. The new operational model, as well as activities necessary for renaming Parex bankawill be carried out after obtaining a permission from the Finance and Capital Market Commission.

Today’s meeting of shareholders is special. It marks the beginning of a new era in the history of Parex banka and will start the transformation process. Today the shareholders have to decide on giving up the credit institution licence. The status change will enable us to concentrate the Bank’s resources and focus on our core business which is the management of distressed assets,” emphasised Jurijs Adamovičs, Member of Parex banka’s Executive Board, in his speech to shareholders.

Taking into account that Parex banka operates as a resolution bank and does not render services characteristic of commercial banks since August 2010, the decision on status change is a well-considered and natural step.Under the tasks set in the Restructuring Plan approved by the European Commission, Parex banka continues to work with distressed assets in order to recover maximum of the state investments. Currently the Bank has focused its operation on three main sectors: loan restructuring, debt recovery and management of the repossessed real estates. Owing the intense work Parex banka has managed to recover more than LVL 200 million from the distressed asset portfolio since August 1, 2010.

The reorganization of the Bank into an asset management company will allow cutting administrative costs related to the licence maintenance, as well as to save on human and time resources that are necessary for meeting the regulatory requirements binding upon credit institutions. After the change of status the state will no longer need to capitalise its deposits which until now was necessary in order to ensure Bank’s operation in line with the regulations of the Credit Institution Law.

After giving up the banking licence Parex banka will have to settle its obligations towards private depositors. The Bank now owns enough resources to meet its obligations. This year the Bank was successful at meeting its obligations in the amount of LVL 164 million against the syndicate loan providers without attracting any state aid which was one of the restrictions that impeded the status change.

The change of status will not affect the obligations of Parex banka’s clients and the Bank will continue to recover loans and ensure successful maintenance and disposal of assets. The existing composition of Parex banka shareholders will not change: LPA – 83.07%, EBRD – 13.61%, and minority shareholders – 3.32%.

The operational model of Parex banka which envisages changing the status and giving up the credit institution licence was supported by the Cabinet of Ministers on November 22, 2011.

Dec 15, 2011
Parex Banka Repays 6 Million Lats to the State before Deadline

Joint Stock Company Parex banka has repaid the principal of deposits made by the State in the amount of 6 million Lats to the Ministry of Finance before deadline. Presently the State has recovered 70 million Lats from Parex banka and received 98 million Lats in interest payments for using aid granted by the State. Additionally Parex banka has carried out repayment of State guaranteed syndicated loan in the amount of 164 Lats, thus releasing the State budget and tax payers from substantial loan liabilities.

Chairman of Parex banka’s Board comments: “I would like to remind that only problematic loans with serious repayment problems are left in the bank’s balance. This means that our everyday work is related with clients who either are incapable of performing their liabilities toward the bank or who do not wish to cooperate and settle their debt liabilities. Also, it is no secret that we frequently encounter with significant counter activity in Latvia and abroad because the amount of several clients’ liabilities is millions of Lats. For this reason I can claim that every Lat recovered by our team is the result of hard work and I have reasonable grounds to be satisfied with our accomplishments.”

Since 1 August 2010 Parex banka has recovered over 200 million Lats from restructuring problematic assets. The largest part of the recovered funds was channelled to repayment of the syndicated loan worth 164 million.  

 

Additional information: 

Parex banka’s activity is focused in three main directions – loan restructuring, debt recovery and real estate management.  The proportion of real estate in Parex banka’s agenda tends to increase – mostly this is alienation, taking over and management of property. In order to acquire the necessary funds for repayment of investments made by the State Parex banka plans to sell real estate at the most beneficial price as the situation in the real estate market improves. Parex banka’s real estate portfolio contained over 800 objects as of 30 September 2011.

Dec 14, 2011
DRAFT RESOLUTIONS of Extra-Ordinary General Meeting of Shareholders of joint stock company „Parex banka” to be held on December 28, 2011

Approved in the meeting of the Management Board of JSC „Parex banka”
on 28 November 2011 and 12 December 2011
and revised in the meeting of the Supervisory Council of JSC „Parex banka”
on 28 November 2011 and 14 December 2011

DRAFT RESOLUTIONS
of Extra-Ordinary General Meeting of Shareholders
of joint stock company „Parex banka” to be held on December 28, 2011

1. On giving up of credit institution operating licence issued to JSC “Parex banka”
1.To give up of credit institution operating licence issued to JSC “Parex banka” subject to the provisions of 3rd part of Clause 126 of Credit Institutions Law.
2.To be in line with provisions of 3rd part of Clause 126 of Credit Institutions Law and maintain the solvency of JSC „Parex banka”, upon request of Ministry of Finance made in accordance with provisions of the agreements on placement of deposits of Ministry of Finance (state aid provided to credit institution business support), to convert deposits placed by Ministry of Finance with JSC „Parex banka” into JSC „Parex banka” dematerialised closed issue bonds.
3.To issue JSC „Parex banka” dematerialised closed issue bonds in the amount of outstanding principal of deposits placed by Ministry of Finance with JSC „Parex banka, being necessary for converting of deposits placed by Ministry of Finance, and authorise JSC „Parex banka” Supervisory Council to approve issue regulations of mentioned JSC „Parex banka” dematerialised closed issue bonds, as well as any further amendments to mentioned issue regulations.
4.To authorise JSC „Parex banka” Management Board to perform all necessary actions to issue JSC „Parex banka” bonds, convert deposits placed by Ministry of Finance into JSC „Parex banka” bonds, as well as receive permission from Finance and Capital Market Commission subject to provisions of 3rd part of Clause 126 of Credit Institutions Law related to giving up of credit institution operating licence issued to JSC “Parex banka”.

2. On amendments to the Articles of Association of JSC “Parex banka”
1.Replace in whole text of Articles of Association of JSC “Parex banka” (except in words “Parex banka”) the word “Bank” with the word “Company”.
2.To amend Paragraph 2.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
“2.1. The main types of the Company’s commercial activity in accordance with the 2nd revision of NACE classification (Statistical classification of economic activities) are as follows:
2.1.1. Restructuring of the Company’s loans (00.00);
2.1.2. Recovery of the Company’s loans (00.00);
2.1.3. Buying and selling of own real estate (68.10);
2.1.4. Renting and operating of own or leased real estate (68.20);
2.1.5. Management of real estate on a fee or contract basis (68.32).”

3. To exclude Paragraphs 6.3.10.-6.3.12. of Articles of Association of JSC „Parex banka”;
4. To amend Paragraph 6.3.13. of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

“6.3.13. granting any credit or pledge or making any decision which imposes to the Company the obligations to the amount exceeding the amounts approved by the Supervisory Council, exccept granting credit to any of Company’s affiliates;”

5. To state that above mentioned amendments to the Articles of Association of JSC “Parex banka” shall become effective as from the moment JSC “Parex banka” has received permission from Finance and Capital Market Commission provided in 3rd part of Clause 126 of Credit Institutions Law in relation to giving up of credit institution operating licence issued to JSC “Parex banka”.

3. On re-naming of JSC “Parex banka”
1.To re-name JSC “Parex banka” after receiving permission from Finance and Capital Market Commission provided in 3rd part of Clause 126 of Credit Institutions Law related to giving up of credit institution operating licence issued to JSC “Parex banka”.
2.To authorise JSC “Parex banka” to perform all necessary activities, incl. to pass all necessary decisions, to approve new name of JSC “Parex banka” in JSC “Parex banka” ordinary shareholders meeting for year 2012.

Nov 30, 2011
Parex Banka Recovered 197 Million Lats; Activity Was in Strict Compliance With Restructuring Plan

Over the first nine months of 2011 joint stock company Parex banka proceeded with strenuous activities in three main areas, namely loan restructuring, debt recovery and property management. In the reporting period several major loan restructuring deals were successfully effected which required highly professional performance, including the ability to find acceptable conditions for all parties involved.

“Professional performance of CIS of loan restructuring experts working with the CIS countries must be emphasized as instrumental for the bank’s capability to recover entire loans initially issued in the amount of several millions of Lats. Since its restructuring on 1 August 2010 Parex banka has in total recovered 197 million Lats, mainly by restructuring problematic loans and selling securities,” points out Christopher Gwilliam, Chairman of Parex banka’s Board.

The longsighted strategy Parex banka has continuously and consistently managed to prevent a forced sale of its assets.

In the reporting period business activity of Parex banka has been carried out in strict compliance with the restructuring plan and the budget; the bank has finished the first nine months of 2011 with losses amounting to 35 million Lats. Parex banka’s losses amounted to 120 million Lats in the same period of 2010.

These results were achieved mainly due to two material items, namely, the excess of interest payable over interest receivable and the provision for bad debts. Considering the fact that Parex banka has retained solely the impaired assets with permanent recovery problems. In many instances debt recovery proceedings were initiated and the repayment of principal amount and interest was continuously overdue. Hence it is legitimate that the interest income levels generated by the Parex bank loan portfolio is significantly lower than that of any other credit institution where it comprises both good and problematic loans.

In the reporting period Parex banka has commenced development and implementation of a large-scale complex project implicating sale of the bank’s subsidiaries, leasing companies in the CIS countries. The first results were achieved in the end of September 2011 when the bank made an exit from the Russian leasing market by entering into an advantageous agreement concerning sale of its Russian subsidiaries Parex Leasing and Extroleasing. Having received the first instalment Parex banka has already recovered more than 14.5 million US dollars and until the end of 2013 it will be continuously receiving amounts collected from gradual sale of problematic assets of the leasing company. Thoroughly planned structure and terms of the transaction will provide for the cash inflow required for repayment of the state investment and contribute to achievement of the objectives outlined in the restructuring plan. In total considerable amounts have been recovered from Russian leasing companies from December 2008 to the present date, more than 120 million US dollars. The considerable recovered amounts were partly used to eliminate Parex banka's liquidity crisis in the past and partly to repay the syndicated loan of 164 million Lats guaranteed by the state, which in May 2011 was repaid by Parex banka in full and without any assistance from the state.

Property related matters, most notably sale, take-over and management of real estate have gained bigger significance and stake in the Parex banka's agenda. Considering that the real estate segment is still rather inactive and recovery is taking place at a very slow pace, the bank is not in hurry to sell the valuable assets contained in its portfolio. Since most items in the bank’s loan portfolio are expected to increase in value, the bank is efficiently managing the property taken over. As soon as the situation in the economy and real estate market improves it is planned to dispose off the property on possibly profitable terms in order to obtain cash resources required for repayment of the state investment. Along with positive developments in the market Parex banka will be increasingly engaged in selling real estate. At the end of the reporting period the real estate portfolio of Parex banka comprised more than 800 items including plots of land and industrial assets.

 

Additional information: 

On 22 November 2011 the Cabinet of Ministers supported the model for Parex banka’s further activity which provides for the bank’s change of status and resignation from its credit institution license. If Parex banka’s shareholder meeting adopts this decision, the bank is going to resign from its credit institution license and, in accordance with the restructuring plan approved by the European Commission, it will continue processing assets in order for the State to cover the maximum amount of funds invested in bailing out the bank. The new functioning model will be introduced after a permit is received from the Finance and Capital Market Commission.

Parex bankas change of status will enable to cut costs related with maintaining its credit institution license. The structure of Parex bankas assets and liabilities will be preserved after its change of status. The change of status will not bring along any changes in liabilities for the bank's clients and, just like previously, the bank will continue recovering issued loans and ensure maintenance and selling of assets.

Nov 28, 2011
Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address:  Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Extra-Ordinary General Meeting of Shareholders of JSC “Parex banka” will take place on December 28, 2011 at 10.00 a.m. at 3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia.

 

Agenda:

  1. On giving up of credit institution operating licence issued to JSC “Parex banka”;
  2. On amendments to the Articles of Association of JSC “Parex banka”;
  3. On re-naming of JSC “Parex banka”.

 

Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – December 28, 2011 - at the venue of the meeting.

 

Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

  • upon registration, shareholders shall present a passport or other personal identification document;
  • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.

 

Shareholders of JSC “Parex banka” can get acquainted with draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 14 December, 2011 till 27 December, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

 

The proposed amendments to the Articles of Association on the 2nd item of the agenda „On amendments to the Articles of Association of JSC “Parex banka””:

1. Replace in whole text of Articles of Association of JSC “Parex banka” (except in words “Parex banka”) the word “Bank” with the word “Company”.

2. To amend Paragraph 2.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

2.1. The main types of the Company’s commercial activity in accordance with the 2nd revision of NACE classification (Statistical classification of economic activities) are as follows:

2.1.1. Restructuring of the Company’s loans (00.00);

2.1.2. Recovery of the Company’s loans (00.00);

2.1.3. Buying and selling of own real estate (68.10);

2.1.4. Renting and operating of own or leased real estate (68.20);

2.1.5. Management of real estate on a fee or contract basis (68.32).”

3. To exclude Paragraphs 6.3.10.-6.3.12. of Articles of Association of JSC „Parex banka”;

4. To amend Paragraph 6.3.13. of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

“6.3.13. granting any credit or pledge or making any decision which imposes to the Company the obligations to the amount exceeding the amounts approved by the Supervisory Council, exccept granting credit to any of Company’s affiliates”.

 

 

Yours sincerely,

JSC “Parex banka” Management Board

Nov 28, 2011
Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address: Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Extra-Ordinary General Meeting of Shareholders of JSC “Parex banka” will take place on December 28, 2011 at 10.00 a.m. at 3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia.

Agenda:
1.On giving up of credit institution operating licence issued to JSC “Parex banka”;
2.On amendments to the Articles of Association of JSC “Parex banka”;
3.On re-naming of JSC “Parex banka”.

Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – December 28, 2011 - at the venue of the meeting.

Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

  • upon registration, shareholders shall present a passport or other personal identification document;
  • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.


Shareholders of JSC “Parex banka” can get acquainted with draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 14 December, 2011 till 27 December, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

The proposed amendments to the Articles of Association on the 2nd item of the agenda „On amendments to the Articles of Association of JSC “Parex banka””:
1. Replace in whole text of Articles of Association of JSC “Parex banka” (except in words “Parex banka”) the word “Bank” with the word “Company”.
2. To amend Paragraph 2.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
“2.1. The main types of the Company’s commercial activity in accordance with the 2nd revision of NACE classification (Statistical classification of economic activities) are as follows:
2.1.1. Restructuring of the Company’s loans (00.00);
2.1.2. Recovery of the Company’s loans (00.00);
2.1.3. Buying and selling of own real estate (68.10);
2.1.4. Renting and operating of own or leased real estate (68.20);
2.1.5. Management of real estate on a fee or contract basis (68.32).”

3. To exclude Paragraphs 6.3.10.-6.3.12. of Articles of Association of JSC „Parex banka”;
4. To amend Paragraph 6.3.13. of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

“6.3.13. granting any credit or pledge or making any decision which imposes to the Company the obligations to the amount exceeding the amounts approved by the Supervisory Council, exccept granting credit to any of Company’s affiliates”.

Yours sincerely,
JSC “Parex banka” Management Board

Nov 14, 2011
DRAFT RESOLUTIONS of Extra - Ordinary General Meeting of Shareholders of joint stock company „Parex banka” to be held on November 28, 2011

Approved in the meeting of the Management Board of JSC „Parex banka”
on 26 October 2011 and 09 November 2011
and revised in the meeting of the Supervisory Council of JSC „Parex banka”
on 27 October 2011 and 14 November 2011

DRAFT RESOLUTIONS
of Extra-Ordinary General Meeting of Shareholders
of joint stock company „Parex banka” to be held on November 28, 2011

1. On share capital increase of JSC “Parex banka”:
1. To increase JSC “Parex banka” share capital by LVL 34,500,000 (Thirty four million five hundred thousand lats) by issuing 34,500,000 (Thirty four million five hundred thousand) registered shares with voting rights with the nominal value of LVL 1 (one lat) per share.
2. To approve JSC “Parex banka” 17th Closed Share Issue Regulations (enclosed).
3. To authorize JSC “Parex banka” Management Board to perform activities necessary to organise JSC “Parex banka” share capital increase.


2. On amendments to the Articles of Association of JSC „Parex banka”:
1. To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

“3.1. The Bank’s share capital is LVL 325,727,295 (Three hundred twenty-five million seven hundred twenty-seven thousand two hundred ninety-five lats), consisting of 325,727,295 (Three hundred twenty-five million seven hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:
3.1.1. 265,583,439 (two hundred sixty-five million five hundred eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”


2. In case not all shares issued in JSC Parex banka 17th closed share issue are subscribed as provided by JSC “Parex banka” 17th closed share issue Regulations and according to JSC “Parex banka” 17th closed share issue Regulations share issue shall be deemed to have taken place in the amount of subscribed shares, to authorise JSC “Parex banka” Management Board to make and approve amendments to Clauses 3.1. and 3.1.1. of JSC “Parex banka” Articles of Association according to the results of JSC “Parex banka” 17th closed share issue.

3. On election of Audit Committee of JSC “Parex banka”
1. To elect Andris Riekstiņš, personal ID: 160160-12978, and Svetlana Koļesņikova, personal ID: 191258-12708, as the members of Audit Committee of JSC “Parex banka” for three years term of duties, determining beginning of the duties from 19 December, 2011.
2. To assign to the Chairman of the Supervisory Council of JSC “Parex banka” to conclude the agreement with newly elected members of Audit Committee.


Riga, November 14, 2011
The Management Board of JSC „Parex banka”

JSC Parex banka
17th closed share issue
REGULATIONS

1. Purpose of the share issue.
In order to ensure stability and efficiency of operations of JSC “Parex banka” (hereinafter – the Bank), compliance with the regulatory requirements, the Bank’s share capital is increased according Article 251 of Latvian Commercial Law by LVL 34,500,000 (Thirty four million five hundred thousand lats) by issuing 34,500,000 (Thirty four million five hundred thousand) registered shares with voting rights with the nominal value of LVL 1 (one lat) per share (hereinafter – New Shares).

2. Previous Bank’s share capital, categories of shares, their number and nominal value.
2.1.
Existing share capital of the Bank is LVL 291 227 295 (two hundred ninety one million two hundred twenty seven thousand two hundred ninety-five lats), consisting of 291 227 295 (two hundred ninety one million two hundred twenty seven thousand two hundred ninety-five) shares (hereinafter – Existing shares) consisting of the following categories of shares:

  • 231,083,439 (two hundred thirty one million eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
  • 60,143,856 (sixty millions one hundred fourty-three thousand eight hundred fifty-six) registered shares without voting rights.


2.2. The nominal value of one share of each category is LVL 1 (one lat).
2.3. All the previous share capital of the Bank has been paid up.

3. Increase of the Bank’s share capital.
3.1
It is envisaged to increase the Bank’ s share capital by LVL 34,500,000 (Thirty four million five hundred thousand lats).
3.2 The previous share capital of the Bank together with increase of the Bank’s share capital constitutes LVL 325,727,295 (three hundred twenty-seven million seven hundred twenty-seven thousand two hundred ninety-five lats).

4. Number of New Shares, category and other conditions.
4.1
It is envisaged to issue 34,500,000 (Thirty four million five hundred thousand) registered shares with voting rights, with respect to which no privileges have been set.

5. Nominal value New Shares, sale price and type of payment.
5.1
The nominal value of 1 (one) New Share is LVL 1 (one lat).
5.2 New Shares are sold at their nominal value. The share premium has not been set.
5.3 New Shares are paid up in cash.

6. Pre-emptive rights of the previous shareholders.
6.1 Previous shareholders (hereinafter – Previous Shareholders) shall have pre-emption rights to subscribe to New Shares, in proportion to nominal value of Existing shares owned by Previous Shareholder at the moment of closing of extra-ordinary shareholders meeting held on 28 November 2011 (hereinafter – Calculation Moment).
6.2. One Existing Share gives the right to subscribe to 0.118464162 (zero point one one eight four six four one six two) New Shares (hereinafter – Pre-emption Rights).
6.3. In case Previous Shareholder according to Pre-emption Rights is entitled to the number of New Shares not being an integer, the number of shares shall be rounded to an integer. Rounding is performed on the top, where the first decimal place is five or more. Rounding is performed down where the first decimal place is less than five.

7. Subscription for New Shares and the procedure of their paying-up.
7.1
The venue of the subscription for New Shares shall be regarded the address: Republikas laukums 2a, Riga, LV-1522.
7.2 Subscribing for New Shares shall be in two stages:

7.2.1. First subscription stage
7.2.1.1. Previous Shareholders shall be entitled to subscribe to New Shares in accordance with Pre-emption Rights.
7.2.1.2. The opening date of the subscription for New Shares shall be the date when Bank has sent to Previous Shareholders these Regulations and information notice (hereinafter – Notice) stating the exact number of New Shares Previous Shareholder is entitled to subscribe in accordance with Pre-emption Rights, and shall be closed after one month after opening. Exact dates of opening and closing of subscription shall be stated in Notice.
7.2.1.3. The subscription for New Share shall be performed by paying up New Share nominal value to the Bank’s account for paying up shares stated in Clause 9 of these Regulations (hereinafter – Account). New Share shall be deemed to be paid if on subscription closing date stated in Clause 7.2.1.2. of these Regulations the full amount of New Share nominal value has been received on the Account.

7.2.2. Second subscription stage
7.2.2.1. On the subscription second stage New Shares not subscribed by Previous Shareholders in the first stage (hereinafter – Remaining Shares) shall be offered for subscription.
7.2.2.2. Previous Shareholders subscribed for New Shares in accordance with Pre-emption Rights (hereinafter – Entitled Shareholders) shall be entitled to subscribe for Remaining Shares.
7.2.2.3. Each Entitled Shareholder is entitled to subscribe for desirable number of Remaining Shares.
7.2.2.4. Subscription for Remaining Shares shall be performed in terms and in accordance with procedure stated by Clauses 7.2.1.2. and 7.2.1.3. of these Regulations simultaneously with subscription for New Shares in accordance with Pre-Emption Rights.
7.2.2.5. In case after subscription closing date stated in Clause 7.2.1.2. of these Regulations Bank’s Management Board finds that number of Remaining Shares subscribed on the second subscription stage exceed total number of Remaining Shares, Remaining Shares shall be divided among Entitled Shareholders participated at the second stage of subscription in proportion to the nominal value of Existing Shares owned by the respective Entitled Shareholder against the total amount of nominal value of Existing Shares owned by all Entitled Shareholders participated in the second stage at Calculation Moment.
7.2.2.6. Nominal values of Remaining Shares paid by Entitled Shareholder for Remaining Shares to which respective Entitled Shareholder is not entitled in accordance with Clause 7.2.2.6. of these Regulations shall be repaid by the Bank to respective Entitled Shareholder to the bank account stated by Entitled Shareholder.

8. Result of New Shares issue
8.1
. Within 3 business days after subscription closing date stated in Clause 7.2.1.2. of these Regulations Bank’s Management Board shall approve the results of New Shares issue by making respective entries un Bank’s shareholders registry.
8.2. Within 10 business days after results of New Shares issue are approved by Bank’s Management Board, Bank shall inform Previous Shareholders participated in New Shares Issue on the number of New Shares owned by respective Previous Shareholder by sending to Previous Shareholder a share certificate.
8.3. In case not all New Shares are subscribed on subscription closing date stated in Clause 7.2.1.2. of these Regulations, share issue shall be deemed to have taken place in the amount of subscribed New Shares. In such case Bank’s Management Board shall be entitled to make and approve amendments to Clauses 3.1. and 3.1.1. of Bank’s Articles of Association according to the results of New Shares issue.

9. Account for paying up shares
Account No.: LV17PARX0012953570001
Bank: AS „Citadele banka", code PARXLV22
Receiver: AS „Parex banka",
(registration No: 40003074590,
legal address: Republikas laukums 2a, Rīga, LV-1522)
purpose of payment: payment for [number] JSC „Parex banka” 17th closed issue shares

10. To shareholders attention
When deciding on subscription for Bank’s shares of new issue, the Bank invites shareholders to evaluate risks related to investment in the Bank's share capital.

Additional information:

Oct 28, 2011
Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address: Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Extra-Ordinary General Meeting of Shareholders of JSC “Parex banka” will take place on November 28, 2011 at 10.00 a.m. at 3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia.

Agenda:

  1. On share capital increase of JSC “Parex banka”;
  1. On amendments to the Articles of Association of JSC “Parex banka”;
  1. On election of Audit Committee of JSC “Parex banka”.


Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – November 28, 2011 - at the venue of the meeting.

Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

  • upon registration, shareholders shall present a passport or other personal identification document.

  • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.


    Shareholders of JSC “Parex banka” can get acquainted with draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 14 November, 2011 till 27 November, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

    The proposed draft decision on the 2nd item of the agenda „On amendments to the Articles of Association of JSC “Parex banka””:
    To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
    “3.1. The Bank’s share capital is LVL 327,727,295 (Three hundred twenty-seven million seven hundred twenty-seven thousand two hundred ninety-five lats), consisting of 327,727,295 (Three hundred twenty-seven million seven hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:
    3.1.1. 267,583,439 (two hundred sixty-seven million five hundred eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
    3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”


    Yours sincerely,
    JSC “Parex banka” Management Board

    Oct 28, 2011
    Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

    Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address: Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Extra-Ordinary General Meeting of Shareholders of JSC “Parex banka” will take place on November 28, 2011 at 10.00 a.m. at 3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia.

    Agenda:
    1.On share capital increase of JSC “Parex banka”;
    2.On amendments to the Articles of Association of JSC “Parex banka”;
    3.On election of Audit Committee of JSC “Parex banka”.

    Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – November 28, 2011 - at the venue of the meeting.

    Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

    • upon registration, shareholders shall present a passport or other personal identification document.
    • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.


    Shareholders of JSC “Parex banka” can get acquainted with draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 14 November, 2011 till 27 November, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

    The proposed draft decision on the 2nd item of the agenda „On amendments to the Articles of Association of JSC “Parex banka””:
    To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
    “3.1. The Bank’s share capital is LVL 327,727,295 (Three hundred twenty-seven million seven hundred twenty-seven thousand two hundred ninety-five lats), consisting of 327,727,295 (Three hundred twenty-seven million seven hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:
    3.1.1. 267,583,439 (two hundred sixty-seven million five hundred eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
    3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”


    Yours sincerely,
    JSC “Parex banka” Management Board

    Oct 20, 2011
    Parex Banka Has Recovered Over USD 150 Million from the CIS Countries’ Leasing Portfolio

    After successful selling of Parex banka’s leasing companies in Russia, the planned sales transaction of Pareks Lizinq and Faktorinq in Azerbaijan was concluded on 20 October 2011 thus recovering additional 3.4 million US dollars. Parex banka has recovered over total of 37 million US dollars from the leasing portfolio in Azerbaijan since the end of 2008 and over 120 million US dollars from leasing companies in Russia. A part of the voluminous funds were channelled for precluding Parex banka’s liquidity crisis in 2008 and another part was channelled for repayment of the State guaranteed syndicated loan worth 164 million Lats which the Bank was able to repay fully this May without additional aid from the State.

    Our main business goal and pledge remains unchanged. It is to recover and repay the maximum of the invested funds to the State therefore selling leasing companies is a natural and logical step. At the same time it is important to select the most optimum action scenario from the possible ones, assessing potential risks and economic gains. The Bank’s business results evidence that the knowledge and experience acquired working in a specific and complex business segment enables us to achieve good results even in the most difficult market conditions,” says Christopher Gwilliam, Parex banka’s Chairman of the Board.

    Similarly to selling Parex Leasing and Extroleasing in Russia, the sales transaction of Azerbaijan leasing company was conducted in accordance with the restructuring plan approved by the Cabinet of Ministers and the European Commission. The plan provided for termination of activity of Parex banka’s leasing companies in the CIS by 31 December 2013 by means of selling or winding them up. The plan did not anticipate investment of additional funds in development and maintenance of business activity of these companies.

    The advantages of immediate sales became expressly evident when assessing and comparing the possible action scenarios and potential gains of selling Parex banka leasing
    company in Azerbaijan. The main factors which enabled to acquire absolute confidence in the correctness of the adopted decision:

    • Large administrative costs which are necessary for ensuring the company’s business and control abroad;

    • The restriction to make investments in the development of leasing companies’ business determined in the Bank’s restructuring plan;

    • Legal risks which are related with other countries’ jurisdictions and different business environment in them;

    • A substantial gain of money;

    • Visible and transparent structure of the sales transaction, including the remittance of money. 


    The independent international expert company also found this transaction as the most optimum solution.

    Several potential buyers expressed their interest in purchasing the leasing company Azerbaijan. Upon the assessment of the proposals submitted by the potential buyers, SWITLAR investments B.V., a private limited liability company from the Netherlands, was selected as the most suitable partner for the transaction. In accordance with the concluded sales contract, Parex banka has received a payment in the amount of 3.4 million US dollars.  Presently Parex banka continues to assess selling opportunities of its leasing company in Ukraine.     

    Additional information:

    Concluding an advantageous transaction on the selling of Parex Leasing and Extroleasing, its subsidiaries in Russia, to a company of the Unicorbank group (Russia), Parex banka left the leasing business in Russia in September 2011. The first payment already recovered more than USD 14.5 million. Until the end of 2013 Parex banka is going to continue receiving payments from gradual selling of the leasing company’s problematic asset portfolio. The well-considered structure and conditions of the transaction will ensure the flow of funds necessary for repayment of the State investments thus facilitating accomplishment of the goals determined in the restructuring plan. The funds recovered from Russian leasing companies are significant – over
    USD 120 million have been received since the State became the chief shareholder of Parex banka.

     

     

       

       

       

       

      Oct 20, 2011
      Over 150 million U.S. dollars in total recovered from the leasing portfolio of CIS countries
      Completing the sales transaction ofParex Leasing and Factoring in Azerbaijan on 20 October 2011, resulted in regaining 3.4 million U.S. dollars. In total, since the end of 2008, over 37 million U.S. dollars have been received from the Azerbaijan leasing portfolio and over 120 million U.S. dollars - from Russian leasing companies.
      Sep 29, 2011
      Parex Banka Leaves the Russian Leasing Market Recovering More Than USD 120 Million

      Consistently and purposefully continuing to work on the determined tasks, Parex banka has concluded a beneficial transaction on selling Parex Leasing and Extroleasing, its Russian subsidiaries, to a company that belongs to Unicorbank Group (Russia). The first payment already recovered more than USD 14.5 million. Until the end of 2013 Parex banka is going to continue receiving payments from gradual selling of the leasing company’s problematic asset portfolio. The carefully thought-out structure and conditions of the transaction will ensure the flow of funds necessary for repayment of the State investments thus facilitating accomplishment of the goals determined in the restructuring plan. The funds recovered from Russian leasing companies are significant – over USD 120 million have been received since the State became the chief shareholder of Parex banka.  

      Selling of Parex Leasing and Extroleasing was conducted in accordance with the restructuring plan approved by the Cabinet of Ministers and the European Commission. The plan provided for termination of activity of Parex banka’s leasing companies in the CIS by 31 December 2013 by means of selling or winding them up. The plan did not anticipate investment of additional funds in development and maintenance of business activity of these companies.  

      “Considering the directions of activity and restrictions determined in the restructuring plan, gains from selling Parex Leasing and Extroleasing are significantly larger than we could expect from continuing the companies’ business activity in a limited period of time followed by their subsequent wind-up. Therefore I am glad that we were able to use the beneficial situation in our favour and conclude the planned transaction in a time when the market is generally more advantageous for buyers than sellers. Presently we are actively reviewing the opportunities of selling our leasing companies in Ukraine and Azerbaijan,” says Christopher Gwilliam, Parex banka’s Chair.

      In accordance with the set tasks, since 2009 Parex banka has been assessing the opportunities of selling its leasing companies located in the CIS. A total of approximately 200 applicants have been reviewed. Several potential buyers expressed their interest in purchasing Parex Leasing and Extroleasing, including Unicorbank, whose offer was acknowledged as the best.   

      The decision on selling both subsidiaries was passed after a group the Bank’s of specialists and an independent international expert company carried out an in-depth analysis of possible business development scenarios, including comparison of cash flows that Extroleasing and Parex Leasing could generate until termination of their activity in the end of 2013 with the economic benefits from immediate selling at a correspondingly determined price.  Such important factors as location of Extroleasing and Parex Leasing in the CIS and the business and legal risks arising from this fact as well as expected costs of the companies' wind-up were considered in the calculations. Similarly, great attention was paid to the applications for purchasing assets, assessing the offered price, business partner’s reputation, sufficiency of funds, legality of the indicated funds and other significant factors in accordance with the procedures approved by the Bank.  As a result, Unicorbank’s offer was found as the optimum one which complies with the determined selling criteria and enables Parex banka to recover a significant share of the funds invested by the State.  

       

      About Parex banka:

      Since 1 August 2010 when Parex banka launched its activity as a solution bank, simultaneously discontinuing provision of such classical bank services as account and deposit services, loans and others. The main goal of Parex banka is to recover State investments to the maximum amount possible.

      In May 2011 Parex banka successfully implemented the first of its very important tasks: it repaid the last instalment of the international syndicated loan guaranteed by the State in the amount of 164 million Lats.Bank repaid this sum from its own funds thus releasing the State and taxpayers from voluminous liabilities.

      Majority shareholders of Parex banka are the State of Latvia which is represented by Privatization Agency and the European Bank for Reconstruction and Development (EBRD).

      Sep 29, 2011
      Over 120 million U.S. dollars recovered by exiting the leasing business in Russia
      On 29 September 2011, Parex banka (at present - Reverta) concluded a beneficial transaction on the sale of its Russian subsidiary Parex Leasing and Extroleasing. Over 14.5 million U.S. dollars were regained from the first payment, and up to the end of 2013 Parex banka will continue receiving payments from the gradual sale of the problematic asset portfolio of the leasing company. In the aggregate, considerable funds have been recovered from Russian leasing companies. Over 120 million U.S. dollars have been received since the state became the largest shareholder of Parex banka in November 2008. Christopher Gwilliam, Chairman of the Board of Parex banka points out:

      “Considering the course of actions and limitations envisaged by the restructuring plan, the benefit from selling Parex Leasing and Extroleasing is considerably larger than the one we can expect from continuous economic operation of these companies within a limited period of time, followed by a subsequent winding-up. Therefore, I am content that we have managed to make use of the favourable market situation and close the planned transaction”.
      Aug 26, 2011
      Resolution on Increasing Parex Banka’s Capital Adopted

      On the Procedure of Parex Banka’s Extraordinary Shareholder Meeting


      Today, on 26 August 2011, in accordance with the announced agenda, the extraordinary shareholder meeting of joint stock company Parex banka has adopted a decision on increasing the Bank’s core capital, introduced amendments related with the increase of core capital in the Bank’s Articles of Association, and approved the provisions for increasing the core capital. 

      In accordance with the adopted decisions, Parex banka’s core capital is to be increased by 20 million Lats by emitting 20 million regular registered shares with voting rights, the nominal value of one share being one Lat. 

      The increase of the core capital is performed in accordance with the restructuring plan and it will ensure stability of Parex banka’s activity and performance of regulatory requirements.  Similarly to the previous increase of the core capital, a part of the accrued interest for term deposits that the State has deposited with the Bank is going to be used this time as well. Thus additional funding from the State for the purpose of increasing the core capital is not necessary. As a result of the transaction, the total amount of Parex banka’s liabilities toward the State will remain unchanged.  Subscription to new shares will be launched today, on 26 August, and it will continue until 26 September 2011.

       

      About Parex banka:  

      Since 1 August 2010 when Parex banka launched its activity as a solution bank, simultaneously discontinuing provision of such classical bank services as account and deposit services, loans and others. The main goal of Parex banka is to recover State investments to the maximum amount possible.

      In May 2011 Parex banka successfully implemented the first of its very important tasks: it repaid the last instalment of the international syndicated loan guaranteed by the State in the amount of 164 million Lats.Bank repaid this sum from its own funds thus releasing the State and taxpayers from voluminous liabilities.

      Majority shareholders of Parex banka are the State of Latvia which is represented by Privatization Agency and the European Bank for Reconstruction and Development (EBRD).

      Aug 26, 2011
      RESOLUTIONS of Extra-Ordinary General Meeting of Shareholders of joint stock company „Parex banka” held on August 26, 2011

      RESOLUTIONS
      of Extra-Ordinary General Meeting of Shareholders
      of joint stock company „Parex banka” held on August 26, 2011

      1. On share capital increase of JSC “Parex banka”:
      1.To increase AS Parex banka’s share capital by LVL 20,000,000 (Twenty million lats) by issuing 20,000,000 (Twenty million) registered shares with voting rights with the nominal value of LVL 1 (one lat) per share.
      2.To approve Regulations for Increase of AS Parex banka’s Share Capital (16th share issue).
      3.To authorize Management Board of AS Parex banka to carry out necessary actions in order to organize share capital increase of AS Parex banka.

      Voting results: decision is taken with the required majority of the votes.

      2. On amendments to the Articles of Association of JSC „Parex banka”:
      To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
      “3.1. The Bank’s share capital is LVL 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five lats), consisting of 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:
      3.1.1. 231,083,439 (two hundred thirty-one million eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
      3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”

      Voting results: decision is taken with the required majority of the votes.

      Riga, August 26, 2011
      The Management Board of JSC „Parex banka”

      Aug 25, 2011
      Parex Banka Recovers Over 100 Million Lats During the 1st Half of 2011

      Parex Bank Continues Recovering State Invested Funds in the 1st Half of 2011 and Demonstrates its Ability to Work in Accordance with the Restructuring Plan

      Financial statements of Parex banka indicate that during the first six months of 2011 it has recovered over 100 million Lats and has been able to repay the State guaranteed syndicated loan worth 164 million Lats without additional help from the State. Likewise, since the split-up the Bank has recovered approximately 800 real estate objects and its small yet efficient team manages assets worth approximately 600 million Lats by servicing over 5’000 clients on a daily basis. Simultaneously the Bank exercises a consistent and farsighted policy for developing accruals for problematic loans thus ensuring additional security in the difficult economic conditions. 

      The biggest challenge for Parex banka during the accounting period doubtlessly was repayment of the State guaranteed international syndicated loan worth 164 million. The Bank accumulated the necessary funds itself, without additional help from the State, thus defending the State’s and tax payers’ interests by completely settling its priority liabilities.

      “I am aware that we are closely observed by the Bank’s supervising institutions and by Latvia’s society because the investments made by the State are directly related with the interests of all tax payers. Therefore I am glad that a friendlier and more understanding attitude has gradually replaced the initial scepticism toward our work. Considering that only problematic loans with serious repayment problems are left in the Bank’s balance, our work is unrewarding and difficult. However each and every one of our achievements is yet another step toward the set goal,” points out Parex Banka’s Chair Christopher Gwilliam.   

      In accordance with the restructuring plan for Parex banka approved by the European Commission and the Cabinet of Ministers, we continued recovering the Bank’s assets, inter alia, overtaking and professional management of real estate, during the accounting period.  Since the split-up of the Bank approximately 800 real estate objects have been taken over and it is anticipated that this number will significantly increase during 2011. The Bank’s real estate portfolio consists of assets of various segments and quality therefore its future value potential is equally diverse. A detailed analysis of each asset is carried out applying prognoses for the economic growth perspectives, development of the real estate market, cash flows that the corresponding object may generate as well as other important factors elaborated by the Bank’s experts.

      A decision on selling, or, quite on the contrary, renting it out until a more beneficial situation occurs in the market is adopted only after a thorough analysis of each asset, says Parex banka’s Member of the Board Jurijs Adamovičs. Even though by essence it would be enough to rely solely on the analysis carried out by the Bank’s experts we request additional assessment from independent experts as well.Parex banka’s continuous being a focal point of the society’s and supervising authorities’ attention determines the necessity for ensuring transparency,” explains J. Adamovičs. 

      All of the overtaken real estate objects that are offered for rent or selling can be found on the Bank’s website at “Real estate”.

      During the accounting period, Parex banka’s business activity has been conducted strongly in line with the budget for 2011 and with the restructuring plan. Over 100 million Lats were recovered during the accounting period, channelling the majority of these funds for repayment of the syndicated loan. In accordance with the requirements of International Financial Reporting Standards and the cautious accountancy policy exercised by Parex banka, accruals for problematic loans in the amount of 18.6 million Lats during the first six months of this year. Even though these accruals are disclosed as losses in the Bank’s balance sheet, the consistent policy for developing accruals ensures additional security in the difficult economic circumstances, thus this is a positive aspect. Depending on further development scenarios for Latvia and the global economy which may leave a significant impact on recovering certain loans, the recognized amount of accruals may be reviewed and decreased in case of a beneficial situation. Likewise, interest payments in the amount of 20 million Lats, which in accordance with the provisions of the agreement, Parex banka has to deposit in the State budget since the investments are also disclosed as expenses in the Bank’s profit and loss statement. Correspondingly, after the end of the accounting period, the State Treasury will be supplemented with a significant sum of money, i.e. 20 million Lats.

      Revaluation of the Bank’s administrative expenses was continued during the first six months of this year. The diligently performed work and the balanced planning has yielded good results – administrative costs during the accounting period made up only 0.9% of the Bank’s average net value. This indicator once again speaks volumes of Parex banka’s administrative structure and its control efficiency considering that the Bank manages assets worth approximately 600 million Lats and services more than 5’000 clients on an everyday basis. 

       

      Information about Parex banka:  

      After the completed restructuring, retaining only the problematic assets with serious repayment problems, Parex banka has become a unique institution in the Baltic States. On 17 May 2011 the Cabinet of Ministers supported the Strategy for Selling Parex Banka developed by Nomura International plc, an international financial consultant. Therefore a decision was adopted that Parex banka must continue implementing the business strategy elaborated by the mentioned financial consultant with for the purpose of maximum recovery of the State investment.  In order to increase and maintain the value of assets overtaken by the Bank, the priority business directions of the latter will continue to be restructuring of problematic assets, recovery of debt and professional management and selling of overtaken real estate objects. It is not planned to offer Parex banka as a whole to investors within the nearest future. 

      Aug 12, 2011
      DRAFT RESOLUTIONS of Extra-Ordinary GMS

      Approved in the meeting of the Management Board of JSC „Parex banka”
      on 25 July 2011 and 11 August 2011
      and revised in the meeting of the Supervisory Council of JSC „Parex banka”
      on 25 July 2011 and 12 August 2011

      DRAFT RESOLUTIONS
      of Extra-Ordinary General Meeting of Shareholders
      of joint stock company „Parex banka” to be held on August 26, 2011

      1. On share capital increase of JSC “Parex banka”:
      1. To increase AS Parex banka’s share capital by LVL 20,000,000 (Twenty million lats) by issuing 20,000,000 (Twenty million) registered shares with voting rights with the nominal value of LVL 1 (one lat) per share.
      2. To approve Regulations for Increase of AS Parex banka’s Share Capital (16th share issue) (enclosed).


      2. On amendments to the Articles of Association of JSC „Parex banka”:
      To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:
      “3.1. The Bank’s share capital is LVL 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five lats), consisting of 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:
      3.1.1. 231,083,439 (two hundred thirty-one million eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
      3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”


      Riga, August 12, 2011
      The Management Board of JSC „Parex banka"

      REGULATIONS
      for Increase of JSC Parex banka Share Capital
      (16th share issue)

      1. Purpose of the share issue.
      In order to ensure stability and efficiency of operations of Parex banka (hereinafter – the Bank), compliance with the regulatory requirements, fulfilment of Bank’s obligations (including repayment of principal and payment of interest for year 2011 of Ministry of Finance (State Treasury) deposits), the Bank’s share capital is increased according Article 251 of Latvian Commercial Law. On 26 August 2011 extra-ordinary shareholders meeting of the Bank passed decision to increase Bank’s share capital by LVL 20,000,000 (Twenty million lats) by issuing 20,000,000 (Twenty million) registered shares with voting rights with the nominal value of LVL 1 (one lat) per share (hereinafter – New Shares).

      2. Previous Bank’s share capital, categories of shares, their number and nominal value.
      2.1.
      Existing share capital of the Bank is LVL 271 227 295 (two hundred seventy one million two hundred twenty seven thousand two hundred ninety-five lats), consisting of 271 227 295 (two hundred seventy one million two hundred twenty seven thousand two hundred ninety-five) shares (hereinafter – Existing shares) consisting of the following categories of shares:

      • 211,083,439 (two hundred eleven million eighty-three thousand four hundred thirty-nine) registered shares with voting rights;
      • 60,143,856 (sixty millions one hundred fourty-three thousand eight hundred fifty-six) registered shares without voting rights.


      2.2. The nominal value of one share of each category is LVL 1 (one lat).
      2.3. All the previous share capital of the Bank has been paid up.

      3. Increase of the Bank’s share capital.
      3.1
      . It is envisaged to increase the Bank’ s share capital by LVL 20,000,000 (twenty million lats).
      3.2. The previous share capital of the Bank together with increase of the Bank’s share capital constitutes LVL 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five lats).

      4. Number of New Shares, category and other conditions.
      4.1
      . It is envisaged to issue 20,000,000 (twenty million) registered shares with voting rights, with respect to which no privileges have been set.

      5. Nominal value New Shares, sale price and type of payment.
      5.1
      The nominal value of 1 (one) New Share is LVL 1 (one lat).
      5.2 New Shares are sold at their nominal value. The share premium has not been set.
      5.3 New Shares are paid up in cash.

      6. Pre-emptive rights of the previous shareholders.
      6.1
      Previous shareholders (hereinafter – Previous Shareholders) shall have pre-emption rights to subscribe to New Shares, in proportion to nominal value of Existing shares owned by Previous Shareholder at the moment of closing of extra-ordinary shareholders meeting held on 26 August 2011 (hereinafter – Calculation Moment).
      6.2. One Existing Share gives the right to subscribe to 0.0737389 (zero point seven three seven three eight nine) New Shares (hereinafter – Pre-emption Rights).
      6.3. In case Previous Shareholder according to Pre-emption Rights is entitled to the number of New Shares not being an integer, the number of shares shall be rounded to an integer. Rounding is performed on the top, where the first decimal place is five or more. Rounding is performed down where the first decimal place is less than five.

      7. Subscription for New Shares and the procedure of their paying-up.
      7.1 The venue of the subscription for New Shares shall be regarded the address: Republikas laukums 2a, Riga, LV-1522.
      7.2 Subscribing for New Shares shall be in two stages:

      7.2.1. First subscription stage
      7.2.1.1. Previous Shareholders shall be entitled to subscribe to New Shares in accordance with Pre-emption Rights.
      7.2.1.2. The opening date of the subscription for New Shares shall be the date when Bank has sent to Previous Shareholders these Regulations and information notice (hereinafter – Notice) stating the exact number of New Shares Previous Shareholder is entitled to subscribe in accordance with Pre-emption Rights, and shall be closed after one month after opening. Exact dates of opening and closing of subscription shall be stated in Notice.
      7.2.1.3. The subscription for New Share shall be performed by paying up New Share nominal value to the Bank’s account for paying up shares stated in Clause 9 of these Regulations (hereinafter – Account). New Share shall be deemed to be paid if on subscription closing date stated in Clause 7.2.1.2. of these Regulations the full amount of New Share nominal value has been received on the Account.

      7.2.2. Second subscription stage
      7.2.2.1. On the subscription second stage New Shares not subscribed by Previous Shareholders in the first stage (hereinafter – Remaining Shares) shall be offered for subscription.
      7.2.2.2. Previous Shareholders subscribed for New Shares in accordance with Pre-emption Rights (hereinafter – Entitled Shareholders) shall be entitled to subscribe for Remaining Shares.
      7.2.2.3. Each Entitled Shareholder is entitled to subscribe for desirable number of Remaining Shares.
      7.2.2.4. Subscription for Remaining Shares shall be performed in terms and in accordance with procedure stated by Clauses 7.2.1.2. and 7.2.1.3. of these Regulations simultaneously with subscription for New Shares in accordance with Pre-Emption Rights.
      7.2.2.5. In case after subscription closing date stated in Clause 7.2.1.2. of these Regulations Bank’s Management Board finds that number of Remaining Shares subscribed on the second subscription stage exceed total number of Remaining Shares, Remaining Shares shall be divided among Entitled Shareholders participated at the second stage of subscription in proportion to the nominal value of Existing Shares owned by the respective Entitled Shareholder against the total amount of nominal value of Existing Shares owned by all Entitled Shareholders participated in the second stage at Calculation Moment.
      7.2.2.6. Nominal values of Remaining Shares paid by Entitled Shareholder for Remaining Shares to which respective Entitled Shareholder is not entitled in accordance with Clause 7.2.2.6. of these Regulations shall be repaid by the Bank to respective Entitled Shareholder to the bank account stated by Entitled Shareholder.

      8. Result of New Shares issue
      8.1.
      Within 3 business days after subscription closing date stated in Clause 7.2.1.2. of these Regulations Bank’s Management Board shall approve the results of New Shares issue by making respective entries un Bank’s shareholders registry.
      8.2. Within 10 business days after results of New Shares issue are approved by Bank’s Management Board, Bank shall inform Previous Shareholders participated in New Shares Issue on the number of New Shares owned by respective Previous Shareholder by sending to Previous Shareholder a share certificate.
      8.3. In case not all New Shares are subscribed on subscription closing date stated in Clause 7.2.1.2. of these Regulations, share issue shall be deemed to have taken place in the amount of subscribed New Shares. In such case Bank’s Management Board shall be entitled to make and approve amendments to Clauses 3.1. and 3.1.1. of Bank’s Articles of Association according to the results of New Shares issue.

      9. Account for paying up shares
      Account No.: LV17PARX0012953570001
      Bank: AS „Citadele banka", code PARXLV22
      Receiver: AS „Parex banka",
      (registration No: 40003074590,
      legal address: Republikas laukums 2a, Rīga, LV-1522)
      purpose of payment: payment for [number] JSC „Parex banka” 16th closed issue shares

      10. To shareholders attention
      When deciding on subscription for Bank’s shares of new issue, the Bank invites shareholders to evaluate risks related to investment in the Bank's share capital.
      Additional information:

      Jul 26, 2011
      Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

      Riga, 26 July, 2011
      No. _____

      Notification on convocation of joint stock company “Parex banka” Extra-Ordinary General Meeting of shareholders

      Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address: Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Extra-Ordinary General Meeting of Shareholders of JSC “Parex banka” will take place on August 26, 2011 at 10.00 a.m. at 3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia.

      Agenda:

      1. On share capital increase of JSC “Parex banka”;
      2. On amendments to the Articles of Association of JSC “Parex banka”


      Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – August 26, 2011 - at the venue of the meeting.

      Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

      • upon registration, shareholders shall present a passport or other personal identification document.
      • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.


      Shareholders of JSC “Parex banka” can get acquainted with draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 12 August, 2011 till 25 August, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

      The proposed draft decision on the 2nd item of the agenda „On amendments to the Articles of Association of JSC “Parex banka””:

      To amend Paragraph 3.1 of Articles of Association of JSC „Parex banka”, approving its new wording as follows:

      “3.1. The Bank’s share capital is LVL 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five lats), consisting of 291,227,295 (two hundred ninety-one million two hundred twenty-seven thousand two hundred ninety-five) shares with the nominal value of LVL 1 (one lat), consisting of the following categories of shares:

      3.1.1. 231,083,439 (two hundred thirty-one million eighty-three thousand four hundred thirty-nine) registered shares with voting rights;

      3.1.2. 60,143,856 (sixty million one hundred forty-three thousand eight hundred fifty-six) registered shares without voting rights.”


      Yours sincerely,
      JSC “Parex banka” Management Board

      Jul 18, 2011
      Parex Banka Does Not Plan to Sell Assets At a Depressive Price

      Many wish to purchase assets of AS "Parex banka" at depressive prices but we did not, do not and will not allow this to happen, in an interview with Nozare.lv business portal stated Jurijs Adamovičs, Member of the Bank's Board of Directors.

      He categorically dismissed admonishments expressed toward the Bank's Management claiming that the latter pick buyers and sell assets selectively at prices determined by the Bank's employees. Mr. Adamovičs emphasized that there are no grounds for such talks.

      He pointed that each transaction is based on an analysis conducted by the Bank as well as an independent external assessment. The Board Member reminded that the activity of Parex banka is not only analysed by the enterprise itself, its activity is also analysed by the Finance and Capital Market Commission (FKTK), Ministry of Finance and Privatization Agency.

      "We have mutually agreed on the principles of work in order for the funds invested in bailing out the bank to be recovered to the maximum extent possible. We perceive all speculations publicly expressed about the quasi dirty deals as defamation," said Member of Parex banka's Board of Directors who pointed out that there are also dishonest people among the Bank's clients who are willing to do everything in order to take vengeance and defame the Bank's employees.

      More than 100 investors have expressed their interest in purchasing separate loans of Parex banka but, as Mr. Adamovičs assured, the Bank does not have the mandate to sell whole loan portfolios and it deals only with development of assets which might include selling separate loans to investors. The Bank's restructuring plan provides for this and such an approach was repeatedly approved by the government when resolving on selling strategies for AS "Parex banka" and AS "Citadele banka".

      Mr. Adamovičs explained that investors are interested in particular expositions which he would not call portfolios. Debt recovery and the subsequent auction of collaterals or selling rights to demand is carried out only in cases when the Bank fails to restructure the loan by way of negotiations. Only when a client shows no "vital signs", avoids or performs deliberate acts of reducing assets' value by him/herself or by the help of third parties, Parex banka is left with nothing else but an option to initiate proceedings and recover debt.

      As announced previously, up to now Parex banka, which was split up last year and which presently holds only problematic assets, has recovered 800 real estate objects from its debtors. Within one year this amount may become twice as large however this depends on how actively third parties will participate in auctions.

      Approximately 5’000 clients remained in Parex banka after split-up in August 2010. 60% of client cases are mortgage loans issued to retail customers. Presently, approximately 2'400 cases are in recovery process and 1'050 cases have been litigated. The remained of cases are being actively prepared for recovery process, Indicated Parex banka's Member of the Board of Directors.

      Parex banka’s portfolio upon split-up in August 2010 was 830 million Lats. Two thirds were Baltic assets and one third was assets in CIS countries, mostly Russia and Ukraine.

      In accordance with the information available on the bank’s website, 81.83% of Parex banka’s shares are owned by Privatization Agency, 14.61% by the EBRD and 3.56% are owned by minority shareholders.

      Full text of interview with J. Adamovičs is available in section “Opinions, Interviews” section of Nozare.lv portal.

      Daiga Grūbe, Nozare.lv

      05.07.2011

      Copyright © LETA

      Jun 27, 2011
      Parex Banka Has Taken Over Almost 800 Property Objects from Debtors

      Published:  27.06.2011. NOZARE.LV

       Parex banka, split up in August 2010, containing only problematic assets, has taken over 800 real estate objects up to now, revealed Jurijs Adamovičs, Member of Parex banka’s Board, in an interview for Nozare.lv business portal.

      He assumed that during the year this amount may increase by two times however this depends on how actively third parties will participate in auctions.

      According to J. Adamovičs, an increasing interest from third parties could be observed in auctions that took place in March. The largest interest can be observed in premium segment where non-residents express their interest in property with the aim of acquiring a residence permit. Property in Mežaparks, Jūrmala, Old Riga (Vecrīga) and the quiet centre are of greatest appeal in auctions.

      The situation in other segments can be characterized as fragile stability in Parex banka’s opinion. By and large, activity is driven by transactions concluded by commercial banks or their subsidiaries.

      Even though Parex banka has taken over almost 800 objects, it offers for sale only the assets with anticipated increase of value. Presently approximately 90 objects are published on the bank’s website for sale or rent. J. Adamovičs explained that interest in these objects exists, yet the number of concluded transactions is low.

      “It will be difficult to find a commercial bank in Latvia which would offer all of its objects on the market. The market is in a phase of fragile stability and no bank is ready to give away property at present prices because that would mean recognition of substantial losses,” said Member of Parex banka’s Board.

      He mentioned that strategies of commercial banks for taking over assets are individual. Adamovičs, avoiding naming any bank in particular, pointed that some of the banks that conduct business activity in Latvia establish subsidiaries the aim of which is to become a profitable self-sustained business. Other banks simply try to clean up their balances. Yet others, on their part, try to form joint companies, attract investors and develop projects.

      Parex banka is the case of totality of various approaches. Adamovičs pointed out that the bank is consciously developing homogenous portfolios by type of property already. For example, subsidiaries which buy only apartments or land exist. Conversely unfinished projects are taken over by companies the particular project for which is going to be the sole and core business. This is how Parex banka is preparing its exit strategy already.

      Parex banka presently has nine subsidiaries and 12 sub-subsidiary companies.

      Parex banka’s portfolio upon split-up in August 2010 was 830 million Lats. Two thirds were Baltic assets and one third were assets in CIS countries, mostly Russia and Ukraine.

      Approximately 5’000 clients remained in Parex banka after split-up. 60% of client cases are mortgage loans issued to retail customers. Presently 2’400 cases are in recovery stage and approximately 1’050 cases have been litigated. The latter ones are cases in which court decision on compulsory recovery of debt has been adopted. The remainder of cases are actively being prepared for recovery process, explained the Member of Parex banka’s Board.

      As announced previously, transfer of good assets from Parex banka to the newly founded Citadele Bank took place in August 2010. Since then Parex banka acts as a solution bank whose main task is to maximize recovery of the investments made by the State within the determined deadline. In order to achieve its goals, Parex banka focuses on recovery of assets, efficient restructuring of loans and management of real estate that has served as security for loans.

      In accordance with the information available on the bank’s website, 81.83% of Parex banka’s shares are owned by Privatization Agency, 14.61% by the EBRD and 3.56% are owned by minority shareholders.

      Full text of interview with J. Adamovičs is available in section “Opinions, Interviews” section of Nozare.lv portal.

      May 31, 2011
      Parex banka's Losses in 2011 First Quarter - Five Million Lats, the Result is Better than Planned

      In overall terms, the activities of the Parex Bank have been in line with the bank’s restructuring plan, and although the bank finished the reporting period with a loss of LVL 5 million, the result is better than had been planned.  This can be attributed to several major Loan restructuring transactions that were successfully entered into during the reporting period.  This substantially improved prospects for recovering certain loans, and it also allowed the bank decrease previously recognised impairment losses.  The possession for unperforming loans were reduced, and that also reduced Q1 2011 losses for the bank.  Given that the Parex Bank is a specific resolution bank, these are financial results which must be viewed positively.  It must be noted here that the final indicator of Parex Bank operations is the amount of money that is recovered by the year 2017.

      “I truly welcome any of our achievements, because the work that we are doing together is not just complicated from the professional perspective, but also difficult.  It seems that there are people who still do not appreciate the importance of the work that we have done or the fact that we are a completely new team which has just one goal – recover the state’s investment as much as possible,” says Parex Bank board chairman Christopher Gwilliam.

      The losses suffered during the reporting period in 2011 were caused by two material – interest expenses exceed of interest income, and net loss on available for sale financial assets and financial liabilities. Since the restructuring of the bank, it has become a unique institution in the Baltic States in that it has only problematic loans with respect to which there already have been repayment problems in the past.  Debt collection has been begun in many cases – those in which neither interest nor the principal sum have been repaid to the bank in a longer period of time.  This is why interest income from the Parex Bank’s loan portfolio is much lower than is the case at any other credit institution which has both good and problematic loans.  Still, the Parex Bank is doing everything that it can to increase interest income as much as possible.

      Because the Parex Bank continues to have obligations toward providers of syndicated loan, the Finance Ministry, and the depositors of subordinated capital, the volume of the bank’s interest expenses is fixed, and it respectively exceeds bank’s interest income.

      During the first quarter of 2011, the priority for the Parex Bank in the context of this overall goal was to collect the money needed to repay its syndicated loan of LVL 164 million.  This was an enormous challenge for the bank’s management and employees, and all of our material and non-material resources were devoted to the accumulation of the necessary sum of money.  Between August 1, 2010, and the end of the reporting period, the Parex Bank engaged in relentless and serious work to recover LVL 125 million.  The sum was mostly based on a restructuring of unpaid loans and on the sale of the bank’s securities portfolio.  It must be stressed that the Parex Bank’s management engaged in a very thoughtful strategy of operations which allowed the bank to avoid any forced sale of its assets.  The real estate market remains inadequate in terms of fairly low prices, and so the Parex Bank is actively managing its properties so that when the situation improves, the properties can be sold in line with market prices and in line with the interests of all taxpayers and shareholders. 

       

      About Parex banka:

      Since 1 August 2010 Parex banka is operating as a resolution bank and it has ceased rendering such classical banking services as account and deposit services, issuing loans etc. The main objective of Parex banka is maximum recovery of the state investments. In order to achieve its goals, the operation of Parex banka is focused on efficient loan restructuring, debt recovery and real estate management.  Majority shareholders of Parex banka are the State of Latvia which is represented by Privatization Agency and the European Bank for Reconstruction and Development (EBRD).<0}    

      May 27, 2011
      RESOLUTIONS of Annual General Meeting of Shareholders of joint stock company „Parex banka” held on May 27, 2011
      RESOLUTIONS
      of Annual General Meeting of Shareholders
      of joint stock company „Parex banka” held on May 27, 2011


      1.About Approval of the Annual report 2010 of JSC “Parex banka”.
      To approve JSC “Parex banka” Annual Report 2010 submitted by the Management Board of JSC “Parex banka” and revised by the Supervisory Council (Enclosed JSC “Parex banka” Annual Report 2010).
      Voting results: decision is taken with the required majority of the votes.

      2. About amendments to the Articles of Association of JSC “Parex banka”.
      To state Clause 6.1. of the Articles of Association of JSC “Parex banka” in the following wording:
      “The Management Board consists of 3 (three) members. The Supervisory Council elects the members of the Management Board and from them the Chairman of the Management Board”.
      Voting results: decision is taken with the required majority of the votes.

      3. About report of the Audit Committee of JSC “Parex banka” for the year 2010.
      To approve the report of the Audit Committee of JSC “Parex banka” for the year 2010.
      Voting results: decision is taken with the required majority of the votes.

      4. About determination of the remuneration for the Audit Committee of JSC “Parex banka”.
      To determine the following monthly remuneration for the members of the Audit Committee of JSC “Parex banka”:
      - the chairperson of the Audit Committee - in the amount of 1250 LVL;
      - the member of the Audit Committee - in the amount of 1000 LVL.
      Voting results: decision is taken with the required majority of the votes.

      Riga, May 27, 2011
      The Management Board of joint stock company „Parex banka”
      May 16, 2011
      Parex Banka is Looking Forward to Objectivity of Supreme Arbitration Court of the Russian Federation and is Striving for Protection of its Legal Interests

      Having encountered discriminatory attitude, Parex Banka turns to the Ministry of Foreign Affairs, Ministry of Justice and Ministry of Finance of the Republic of Latvia with an official request for assistance.

      Joint Stock Company Parex banka filed an application on review of decisions passed by Courts of Appeal and Cassation instances within the procedure of monitoring.The Bank’s rights were recurrently violated when a Federal Arbitration Judge of Moscow district stayed enforcement of decision passed by instance of appeal. The decision voided an unlawful decision of Moscow Arbitration Court on conceding “Univermag Moskva” bankrupt and initiation of tender procedure. Such a decision resulted in forbidding the Bank as the largest creditor to participate in the insolvency process fully, thus providing ungrounded advantages for a group of creditors which are trying to attain announcing of “Univermag Moskva” bankrupt and selling the company’s assets in a non-transparent manner.

      “This is not the first violation of foreign investors’ rights within the project of “Univermag Moskva” and it might create a dangerous precedent. Discrimination of foreign investors by failing to provide them with equal rules of the game not only harms cross-border relations between Latvia and Russia, it also serves as a negative signal for other foreign investors. We are surprised about such a bald and express violation of foreign investors’ rights from the part of court institutions in a country which actively attempts to join World Trade Organization,” emphasizes Christopher Gwilliam, Chairman of Parex banka’s Board of Directors.

      In order to preclude further judicial discrimination of the Bank as a resident of the Republic of Latvia from the part of Russia’s court institutions and to solve the extraordinary and inacceptable situation, Parex banka has turned to the Ministry of Foreign Affairs, Ministry of Justice and Ministry of Finance of the Republic of Latvia with an official request for support.

      Ministry of Foreign Affairs has already initiated review of the issue in Intergovernmental Committee of the Republic of Latvia – and Russian Federation. Turning to the European Commission in Brussels and at its delegation in Moscow is planned in the nearest time.

      Good relations with the Russian Federation in the shape of judicial cooperation is very important for Latvia therefore we are glad for the understanding demonstrated by Latvia’s government and for its support in solving the situation,” points out Christopher Gwilliam.

      Parex banka had already encountered a discriminatory attitude and substantial violation of foreign investors’ rights in the case of OAO “Univermag Moskva” both – from the part of individual court institutions of the Russian Federation as well as from the part of the present insolvency administrator who expressly is defending the interests of a small group of creditors. Parex banka has reasonable grounds to believe that the principle of independency of courts is not being observed which requires a court to ensure a fair course of processes and observance of parties’ rights and the Bank most probably cannot rely on fair, lawful, objective and independent conduct of court instances of the Russian Federation.

      “Actually, this deliberately and unreasonably deferred insolvency process of “Univermag Moskva” has thrown us back into 2010 when vitally important decisions had to be made on further fate of the enterprise. “Univermag Moskva” could have been in business and worked on restoring its insolvency for all of this time, thus finding a way to reimburse the shopping centre’s liabilities,” says Christopher Gwilliam.

      Majority shareholders of Parex banka are the State of Latvia which is represented by Privatization Agency and the European Bank for Reconstruction and Development (EBRD).

      May 13, 2011
      DRAFT RESOLUTIONS of Annual General Meeting of Shareholders of joint stock company „Parex banka” to be held on May 27, 2011

      Approved in the meeting of the Management Board of JSC „Parex banka”
      on March 17, 2011
      and revised in the meeting of the Supervisory Council of JSC „Parex banka”
      on March 24, 2011

      DRAFT RESOLUTIONS
      of Annual General Meeting of Shareholders
      of joint stock company „Parex banka” to be held on May 27, 2011

      1. About Approval of the Annual report 2010 of JSC “Parex banka”.
      To approve JSC “Parex banka” Annual Report 2010 submitted by the Management Board of JSC “Parex banka” and revised by the Supervisory Council (JSC “Parex banka” Annual Report 2010 is available on http://reverta.lv/en/investors/text-table/).

      2. About amendments to the Articles of Association of JSC “Parex banka”.
      To state Clause 6.1. of the Articles of Association of JSC “Parex banka” in the following wording: “The Management Board consists of 3 (three) members. The Supervisory Council elects the members of the Management Board and from them the Chairman of the Management Board”.

      3. About report of the Audit Committee of JSC “Parex banka” for the year 2010.
      To approve the report of the Audit Committee of JSC “Parex banka” for the year 2010.

      4. About determination of the remuneration for the Audit Committee of JSC “Parex banka”.
      To determine the following monthly gross remuneration for the members of the Audit Committee of JSC “Parex banka”:
      the chairperson of the Audit Committee Guna Kalniņa-Priede in the amount of 700 LVL;
      the member of the Audit Committee Svetlana Koļesņikova in the amount of 500 LVL;
      the member of the Audit Committee Andris Riekstiņš in the amount of 500 LVL.

      Riga, March 11, 2011
      The Management Board of JSC „Parex banka”

      May 12, 2011
      Senate Repeals Decision on Admission of Ieva Plaude-Rēlingere’s Insolvency

      Today, on 11 May, Senate of the Supreme Court (SC) repealed decision of Riga City Vidzeme District Court passed in December 2010 on admission of insolvency of Ieva Plaude-Rēlingere, founder and shareholder of Kolonna group.

      Joint Stock Company Parex banka turned to Prosecutor General Office of the Republic of Latvia with a request to submit a protest against the applied decision of Riga City Vidzeme District Court passed on 7 December 2010 wherewith Ieva Plaude-Rēlingere’s insolvency application was satisfied, announcing her insolvency. Parex banka believes that procedural and substantial regulatory norms have been materially violated during review of the case.

      Inter alia, the Court has not assessed evidence submitted by Parex banka regarding I Plaude-Rēlingere’s deliberate and malicious activities as the grounds for insolvency. During the last three years prior to lodging for insolvency, I. Plaude-Rēlingere has carried out a number of transactions with related persons, materially deteriorating her financial situation. Parex banka believes that these transactions have been effected with the intent to avoid performing liabilities and they have substantially injured the interests of I. Plaude-Rēlingere’s creditors. Likewise, Parex banka considers that I. Plaude-Rēlingere has provided incomplete, therefore untruthful, information about her property in the insolvency case. For example, the bank has information at its disposal about substantial assets possessed by I. Plaude-Rēlingere which she has not declared as belonging to her in the plan for sales of and settlements with creditors.

      Parex banka has initiated proceedings against several companies of Kolonna group and Ieva Plaude-Rēlingere individually. The reason for initiating proceedings is continuous failure of Kolonna and Plaude-Rēlingere to perform liabilities toward Parex Banka.

      May 3, 2011
      Parex banka has repaid the syndicated loan in the amount of 164 million Lats without attracting state budgetary funds

      Today, 3 May, Parex banka has made the last international syndicated loan payment in the amount of 164 million Lats. The payment has been made from the Bank’s own capital without attracting state budgetary funds. Hence, the state budget has been safeguarded and the prior and the most vital obligations of the Bank have been settled in full.

      “Considering the complicated fiscal situation in the country and difficult political decisions that the government has to make regarding budget consolidation, I am truly satisfied with the achievements of the new team of the Bank. We have managed to square accounts with the syndicated loan providers thus relieving the state budget and taxpayers from obligations as large as 164 million Lats,” emphasises Christopher Gwilliam, chairman of Parex banka’s Executive Board.

      “Distinguished participants of the international markets followed the events and were truly interested whether Parex banka will be able to meet the impressive loan obligations on its own; they deemed the upcoming ability or inability as an important indicator of the recovery of the Latvian economy. Therefore, timely repayment of the syndicated loan without claiming the state guarantee is a remarkably positive signal to foreign investors and rating agencies. It gives evidence about gradual recovery of the economy and confirms that the government has made the right decisions and implemented the right strategy as to solving problems of the banking sector,” says Christopher Gwilliam.

      According to the Restructuring plan approved by Parex banka, most part of the notable sum was recovered via restructuring of the distressed assets at disposal of the Bank and sale of securities. For the purpose of the loan repayment Parex banka has attracted all free monetary resources that had been accrued which has strenghthened the Bank’s confidence that it will have enough cash both for timely settlements with the lenders and for further economic activity of the bank.

      Due to the cautious strategy that Parex banka chose the Bank has been able to avoid fire-sale of assets. Considering the depressed real estate market and still relatively low price level, in most of the cases the price offered by buyers was many times lower than that established by experts of the bank. Thereby, number of deals with real estates has been insignificant and has not contributed to the total sum necessary for the loan repayment.

      “I would like to thank everyone – employees of the Bank, the Financial and Capital Commission Market, the Ministry of Finance and the State Treasury. All of them have worked hard and have helped to overcome many seemingly insurmountable difficulties. Today I can announce that we have successfully accomplished our first important task,” emphasises Mr Gwilliam.

       

      Information about the syndicated loan:

      On 29 June 2007 under the guidance of the former members of the Executive Board V.Kargins and V.Krasovickis Parex bankaentered into an agreement on receiving two syndicated loans for a total sum 500 million Euro and 275 million Euro with a two year maturity as of signing the agreement. The said deal was refinancing to the previous syndicated loan for a total sum 310 million Euro which matured in July 2007. It was planned to use the residual resources to develop activity of the bank.

      On 8 November 2008 the majority interest of Parex banka was taken over by state and thereby the state assumed the obligations entered into between Parex banka and the syndicated loan providers.

      Parex banka covered the syndicated loan in the amount of 163.4 million Lats in March 2009, the next payment was due in February 2010 when Parex banka repaid 217.8 million Lats. The last syndicated loan payment to the international lenders was made on 3 May 2011.

       

      About Parex banka:

      Since 1 August 2010 Parex banka is a resolution bank and has ceased to render such classic banking services as account and deposit services, loan issuing and others. Now the main objective of Parex banka is maximum recovery of the state investments. In order to achieve its goals, the operation of Parex banka is focused on efficient loan restructuring, debt recovery and real estate management.

      At the time being, assets of Parex banka, estimated to be equal to 800 million Lats, are managed by a team of highly qualified specialists. According to globally accepted standards, Parex banka with its relatively small number of staff members is considered to be a very efficient organization. The success of such enterprise model lies in advised attraction of outsourcing service providers and continuous evaluation of administrative resources. 

       

      Apr 26, 2011
      Notification on the Annual Shareholders’ Meeting of Joint Stock Company “Parex banka”

      To shareholder of Joint Stock Company “Parex banka”

      Notification on convocation of joint stock company “Parex banka” Annual General Meeting of shareholders

       

      Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address:  Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Annual General Meeting of Shareholders of JSC “Parex banka” will take place on May 27, 2011 at 10.00 a.m. at Citadele conference hall (3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia).

      Agenda:

      1. About Approval of the Annual report 2010 of JSC “Parex banka”.
      2. About amendments to the Articles of Association of JSC “Parex banka”.
      3. About report of the Audit Committee of JSC “Parex banka” for the year 2010.
      4. About determination of the remuneration for the Audit Committee of JSC “Parex banka”.

      Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – May 27, 2011 - at the venue of the meeting.

      Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

      • upon registration, shareholders shall present a passport or other personal identification document.
      • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.

      Shareholders of JSC “Parex banka” can get acquainted with the Annual report 2010 of JSC “Parex banka” and draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 13 May, 2011 till 26 May, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

      The proposed draft decision on the 2nd item of the agenda „About amendments to the Articles of Association of JSC “Parex banka””:

      To state Clause 6.1. of Articles of Association of JSC “Parex banka” in the following wording:

      “The Management Board consists of 3 (three) members. The Supervisory Council elects the members of the Management Board and from them the Chairman of the Management Board”.

      Apr 26, 2011
      Notification on the Annual Shareholders’ Meeting of Joint Stock Company “Parex banka”

      To shareholder of Joint Stock Company “Parex banka”

      Notification on convocation of joint stock company “Parex banka” Annual General Meeting of shareholders


      Management Board of JSC “Parex banka” (unified registration number: 40003074590, legal address: Republikas laukums 2A, Riga, Latvia LV-1522) calls up and announces that Annual General Meeting of Shareholders of JSC “Parex banka” will take place on May 27, 2011 at 10.00 a.m. at Citadele conference hall (3rd floor conference hall of JSC “Citadele banka”, Republikas laukums 2A, Riga, Latvia).

      Agenda:

      1. About Approval of the Annual report 2010 of JSC “Parex banka”.
      2. About amendments to the Articles of Association of JSC “Parex banka”.
      3. About report of the Audit Committee of JSC “Parex banka” for the year 2010.
      4. About determination of the remuneration for the Audit Committee of JSC “Parex banka”.


      Shareholder Registration will be open from 09.30 a.m. till 10.00 a.m. on the day of meeting – May 27, 2011 - at the venue of the meeting.

      Shareholders have rights to participate in the meeting in person or by mediation of their legal representatives or authorised persons:

      • upon registration, shareholders shall present a passport or other personal identification document.
      • upon registration, representatives and authorised persons of shareholders shall present a passport or other personal identification document, and shall submit written power of attorney of the represented shareholder issued according to legislative acts, or legal representatives shall present a document certifying the authorisation.


      Shareholders of JSC “Parex banka” can get acquainted with the Annual report 2010 of JSC “Parex banka” and draft decisions as well as additional information and give their suggestions and proposals on the Agenda starting from 13 May, 2011 till 26 May, 2011 at premises of JSC “Parex banka”, Republikas laukums 2A, Riga, Latvia on all business days from 10.00 a.m. till 16.00 p.m., arranging appointment on the previous day by the phone number +371 67779178 and at Registration on the meeting day.

      The proposed draft decision on the 2nd item of the agenda „About amendments to the Articles of Association of JSC “Parex banka””:

      To state Clause 6.1. of Articles of Association of JSC “Parex banka” in the following wording:

      “The Management Board consists of 3 (three) members. The Supervisory Council elects the members of the Management Board and from them the Chairman of the Management Board”.

      Apr 20, 2011
      Parex Banka’s Accrued Reserves With the Bank of Latvia Will Be Used for Repayment of Syndicated Loan

      Parex banka has accumulated nearly all funds necessary for repayment of syndicated loan, among them drawing in of Parex banka’s accrued reserves with the Bank of Latvia. Further holding of these funds in the mandatory reserves account has neither economic nor logical basis. In accordance with European Commission’s approved Restructuring Plan for Parex banka and the goals contained therein, repayment of syndicated loan without State aid is determined as priority of Parex banka’s present activity. The amount of loan is 164 million Lats, repayment term - 5 May 2011

      “The essence of mandatory reserves is limitation of a credit institution's risk transactions however Parex banka has not been providing classical services characteristic to commercial banks since 1 August 2010 already. We are not a participant of the money market; restrictions posed by the European Commission which prohibit attraction of deposits and issuing of loans are binding to Parex banka,” points out Christopher Gwilliam, Chairman of Parex banka’s Board of Directors.  

      As announced previously, aided by the State, on 1 August 2010 Parex banka became a unique financial institution, i.e. manager of specific problematic assets, in Latvia and the Baltic States and its sole aim is to recover State investments to the maximum extent possible.Presently Parex banka’s activity is focused on restructuring of loans, recovery of debt and management of overtaken assets.

      “According to my international experience in bank restructuring which is more than 20 years long, I can say with full responsibility that holding Parex banka’s owned funds with the Bank of Latvia does not comply with the purpose of keeping mandatory reserves.Our mandatory reserves are calculated and accumulated largely on the basis of the bank’s liabilities toward the investments made by the Ministry of Finance and syndicated loan therefore the use of these funds for repaying the loan is a logical step,” emphasizes Christopher  Gwilliam.

      Such a solution is permitted in the existing legislation and for this reason Parex banka has turned to the Financial and Capital Market Commission and the Bank of Latvia with a request to release it from performance of mandatory reserves requirements and to channel the funds in the amount of 26 million Lats accrued with the Bank of Latvia for repayment of the syndicated loan.

      Mar 31, 2011
      Unaudited Financial Results of Joint Stock Company Parex banka for 2010

      The economic activity of the Bank has been in line with the approved restructuring plan

      The year 2010 marked significant changes in the economic activity of AS Parex banka – on 1 August, with the state aid, the restructuring of Parex banka which had found itself in financial difficulties was successfully implemented, and Parex banka became a unique financial institution in Latvia – a specialized distressed asset manager – with an ambitious aim: maximum recovery of the state aid.

      Under the International Financial Reporting Standards which are binding upon the bank, in the accounting period Parex banka established reserves in the amount of LVL 115.7 million for non-secure loans. The correction has naturally affected the general financial indicators, and Parex banka closed the year 2010 with forecasted losses of LVL 152.7 million. It must be emphasised that all the recovered resources are transferred to repayment of the syndicate loan and the state investment, thus, in line with the approved restructuring plan the operation of Parex banka is not expected to be profitable at any time soon. At the same time the bank strives to limit losses as much as possible and it therefore implements thought-out and cautious operational and financial activities by carefully evaluating all expenses.

      “After the split Parex banka became a unique financial institution in Latvia with a great responsibility towards the state and investors. This work is not only complicated but very hard as well, since we deal with various debtors in Baltic, CIS and offshore countries. Attitude towards implementation of their obligations is as various and we often encounter with deliberately dishonest actions,” says CEO of Parex banka Christopher Gwilliam.

      During the accounting period Parex banka has launched several proceedings against clients who have failed to implement their obligations in a long term. The management of Parex banka has said recurrently that it will use all legitimate means to protect the interests of the state and to combat any malicious and penal actions.

      “After having worked for eight months at Parex banka, we now see that not all loans were used in line with the initially stated purpose. As a result, the collateral is substantially smaller than the loan. Actually, consequences of the careless attitude of these borrowers lies on shoulders of the Latvian tax-payers, because unfortunately in such cases very often the Bank has no choice but to recognize losses,” emphasises Christopher Gwilliam.

      In compliance with the Restructuring plan of AS Parex banka and the decision of the Cabinet of Ministers, the share capital of the bank was increased by LVL 9.7 million on 28 December 2010. The purpose of the transaction was to meet the capital adequacy requirements. State Joint Stock Company Privatizācijas aģentūra increased the state’s involvement in the Bank’s share capital by acquiring the newly-issued shares. Thereby, as at 31 December 2010 the proportional distribution of Parex banka shareholders was as follows: Privatizācijas aģentūra – 81.83%, European Bank for Restructuring and Development – 14.62%, and minority shareholders – 3.56% of Parex banka shares.

      By evaluating the amount of investments in Parex banka, stability of LVL currency market, as well as liquidity ratios, on 5 May 2010 Parex banka entered into a contract with the Bank of Latvia for early repayment of the borrowed funds in the amount of LVL 117.6 million. In December 2010 Parex banka repaid LVL 9.7 million in interest for use of the state deposit.

      As at 31 December 2010 the loan portfolio of Parex banka and the Group was LVL 566.3 and LVL 541.6 million respectively, total assets – LVL 789.3 and LVL 792.1 million. The amount of capital and reserves at the end of 2010 was equal to LVL 48.5 and LVL 48.1 million.

      From 1 August 2010 till the end of the accounting period, namely within 5-month time, Parex banka had recovered LVL 58 million. Basically this sum consisted of monetary instruments recovered through distressed loan restructuring activities and sale of securities, but the sales volume of the repossessed real estates was insignificant and did not actually have any effect on the total amount of the recovered sums. Having regard of the prevailing situation and particularly low prices in the real estate market in 2010, in majority of cases the potential market value of the assets in question was substantially higher than the offered one.

      In order to manage the vast assets (almost LVL 800 million) of Parex banka efficiently, in the second half of the accounting period a great deal of attention was paid to attracting adequately trained professionals. By the side of globally accepted standards, Parex banka with only slightly more than 100 employees is considered to be a very efficient organization. The success of the modern enterprise model lies in advised attraction of outsourcing service providers and continuous evaluation of administrative resources.

      Due to objective reasons Joint Stock Company Parex banka is planning to submit the audited financial statements of 2010 to the official central storage system of the mandatory information and a/s NASDAQ OMX Riga within two months as of submission the unaudited financial statements, i.e., by 31 May 2011. Under provision of the law, statements have been given to a certified auditor for examination, so as to be submitted to Parex banka Supervisory Board for obtaining an opinion and to the shareholders meeting for approval.

      Mar 25, 2011
      Michael Bourke to Discuss Financial Market, Its Prospects

       Michael Bourke, council chairman of the Parex Bank, will be appearing at an event organised by the American Chamber of Commerce in Latvia today, March 25, to deliver a presentation on the history and future of the Latvian financial market.  He will discuss his experience with bank restructuring in Latvia and Ireland and offer suggestions on how to promote economic growth in Latvia and address problems in the banking sector.

      A few months ago, Mr Bourke successfully participated in a seminar organised by the Dublin Chamber of Commerce, “Latvia: The Road to Eastern Europe.”  There, he called on Irish businesspeople to make investments and launch business operations in Latvia.  The event attracted a great deal of interest, and potential investors learned about business opportunities in Latvia, key facts about the country’s business environment, and the overall environment for business and economics in Latvia.  They also received consultations and support for the launching of enterprises in the country.

      Mr Bourke has spent nearly 40 years as a banking professional.  He began his career in 1971 at the Irish Central Bank, later moving over to the International Monetary Fund.  From 1992 until 1997, Mr Bourke was an advisor to the Bank of Latvia, helping Latvia to establish a modern banking oversight system.  From 1997 until 2006, he was president and board chairman of the Rietumu Bank, and in 2009, he was elected to the council of the Parex Bank.  As of September 2010, Mr Bourke has also been a consultant to the Irish Central Bank.  He is a fellow member of the Association of Chartered Certified Accountants (FCCA) and has been appointed by the Irish government as its honorary consul in Latvia.

      Mar 23, 2011
      A comment from the Parex Bank on the public statements of Ieva Plaude-Rēlingere:

      We believe that the recent public activities of Ieva Plaude-Rēlingere represent an open attempt to influence decision makers, including courts, in relation to the Prosecutor General Office’s protest against the declaration of her insolvency – an issue which will soon be reviewed by the Senate of the Supreme Court.

      We would like to make clear that Parex is open to dialogue only with those clients who are prepared to engage in honest and constructive co-operation.  In those cases when clients fail to satisfy their obligations in the long term and try to avoid them dishonestly, we do and will use all of the legitimate resources that are available to us to recover the money of taxpayers.

      Mar 22, 2011
      Decision on Parex Bank Will Set Out Prospects for Economic Development

      There have been recent public discussions about possible solutions in relation to the future of the Parex Bank.  One possibility that has been mentioned behind the scenes is to sell off the Parex Bank’s assets.  I do not think that this would be at all advantageous for the state, because asset prices are too low.  I also do not understand the secrecy under which such decisions are reviewed and, possibly, taken.

      To a significant extent, the issue of the future of the Parex Bank has to do with the government’s attitude and faith in national economic development as such.  Time is needed to restructure toxic loans because the real estate market has to recover so that the Parex Bank has a better chance to recover as much money as possible from the problematic loans and to repay the loan to the National Treasury.  Here we must face a key question:  Does our government believe in economic development or not?  Does it or does it not see promises of economic development in the long term?

      I am convinced that the government must not be in any hurry with the sale of Parex Bank assets and permit the sale of assets for any more or less acceptable price just to put another patch on the national budget.  In this case, short-term thinking is absolutely impermissible, because at long last, the government should start to think about the state’s sustainable economic development, as opposed to growth in a foreseeable period.  This can be compared to the housing bubble with which we are all so very much familiar.

      If the government is starting to talk about the sale of assets, that is probably because it wants to cover the budget deficit while ignoring the issue of whether this would really be the best strategy in the long term.  I think that this strategy is another way of avoiding truly necessary structural reforms, including administrative reforms in this country.  On the other hand, of course, it would be ideal if the state were able to recover all of the money that it invested in the Parex Bank, but international experience shows that larger or smaller losses usually cannot be avoided.

      Because the Latvian Mortgage and Land Bank (LHZB) is being transformed into a developmental bank – something which Latvia really needs – then it would be completely logical to attach the toxic loans of the LHZB to the Parex Bank.  That is because since last year, the Parex Bank has specialised specifically in restructuring problematic assets and in recovering debt.  I think that it would be wrong to set up yet another financial institution to collect toxic loans.

      Feb 28, 2011
      On Submitting AS Parex banka Financial Statements of 2010

      Due to objective reasons the Joint Stock Company Parex banka is planning to submit its unaudited financial statements of 2010 to the official central storage system of the mandatory information and a/s NASDAQ OMXRiga from 28 February to 31 March, not by the end of February as the company had planned before.

      Considering the sophisticated restructuring process of Parex banka and the complexity of reflecting thereof in the financial statements, additional time is required so that the bank would be able to provide true and fair financial information complying with the International Financial Reporting Standards in the best interests of all its shareholders.

      At the same time, the published 9-month results and the regular financial reports show that in general the results of economic activity of Parex banka comply with the forecasts and are in line with the restructuring plan approved by the Cabinet of Ministers and the European Commission. Having regard of the peculiar nature of Parex banka operation the profit is not anticipated, therefore the most significant factor, when evaluating the results of Parex banka activity, is and will be the recovered amount of the cash. At the same time, the bank strives to minimize the losses to extent possible by continuing a thought-out and cautious implementation of the operational and financial activity, as well as by scrupulous evaluation of all expenses and efficient use of the internal and external resources.

       

      About Parex banka:

      Since 1 August 2010 Parex banka is operating as a resolution bank and it has ceased rendering such classical banking services as account and deposit services, issuing loans etc. The main objective of Parex banka is maximum recovery of the state investments. In order to achieve its goals, the operation of Parex banka is focused on efficient loan restructuring, debt recovery and real estate management.   

      Feb 17, 2011
      Michael Bourke: Restructuring banks – Latvia’s experience and some lessons from Ireland

      Introduction

      Ireland like Latvia is now signed up to an EU / IMF Financial and Economic Recovery Plan with very tough performance parameters for both countries and their citizens. Problems associated with the Banking systems are at the core of the problems in both countries and accordingly, very strong measures are required to restructure banks so as to make them to function as proper commercial banks to meet the needs of the Economy and economic growth.  In many ways, Latvia is further along the road to reforming the Banking in system and this has been achieved, so far,  by choosing the best options available. Having said that, it should be remembered that no two banking system are the same and so, the solutions in dealing with problems will always be different. There are however, some fundamental decisions that must be got right from the start.

       

      What caused the banking problems in both Ireland and Latvia?

      There is no doubt that prolonged and unsustainable lending by banks in both countries underlies the collapse that occurred in banking, with consequent very serious damage to the wider economy. Both countries had strong Economic growth for many years but with Banks lending aggressively and too cheaply into the Property speculation and Consumer spending, asset price bubbles were created which eventually burst with devastating results. In Ireland, this was driven mainly by one very aggressive fast growing Bank – Anglo Irish bank, which collapsed in spectacular manner when International Credit markets dried up. Anglo Irish was a Private Bank servicing a limited number of so called “High Net Worth clients”, mainly very large Property developers. Buoyed on by the enormous growth in nominal profits in Anglo, the two larger and more traditionally conservative banks – AIB Bank and Bank of Ireland threw out their Lending rule books and went after the same and an even wider network of High Net Worth and Medium Net worth clients – all focused on speculative and unsustainable growth in Property Prices. In Latvia, based on my own personal experience as CEO of a bank in Latvia from 1998 – 2006, a similar situation with aggressive and unsustainable lending was driven mainly by the Scandinavian banks through their Latvian subsidiaries. The Scandinavian banks had, it seemed , unlimited access to Lending resources from their parent banks in Scandinavia and with the motivation of rapid ( nominal) profit growth while seizing market share,  through drove ahead with unlimited very cheap credit.  Other Latvian banks, but in particular Parex bank , tried to keep up with this competition and to hold onto market share by borrowing on International Credit markets (Syndicated loans, Euro Bonds etc.) and on-lending in a similar frenzy. When International Credit Markets collapsed in 2007/08, Parex lost access to its credit sources and so, collapsed into the arms of the Latvian State. The Scandinavian banks fell into the arms of their parents back home.

      It is important to state that, even if the International Credit Markets had continued to function post the collapse of Lehman brothers, the pace and extent of existing lending was so large in both Ireland and Latvia that it would have blown up anyway at some point. This is because banks were primarily lending into speculative rather than productive ventures on the back of already inflated Property prices and wasteful consumer spending on the back of ‘paper wealth” from the same Property speculation. If International Credit had continued to fund this madness, even greater bubbles would have resulted with more disastrous economic consequences.

       

      In the old days of prudent banking, bankers were trained professionally to lend less than 100% of their deposit base always, so as not to over-expose their Depositors to an unmanageable level of risk via Lending. However, over the past 15 years or so, as money became very cheaply priced worldwide, International Lending between banks grew exponentially and the Prudential maxim of the Loans to Deposits ratio went out the door, together with a lot of other prudential banking norms. The Lending splurge blew up in many economies in 2007 /2008 and it was a huge factor underlying the banking collapses in Ireland and Latvia. The following Table of Loan to Deposit ratios of a variety of Irish based banks and Latvian based banks, gives a very clear picture of how ‘out of control’  lending had become by the end of 2008.

       

      LOAN TO DEPOSIT RATIOS FOR SELECTED BANKS AT THE END OF 2008

      Euro Billion                     Banks in Ireland                         Banks in Latvia

                                                AIB Bank     Bank of Ireland       Swedbank          SEB             Parex

      Total assets                      182.1                197.1                       7.5                   4.3                4.5

      Loans to clients                129.5                133.7                       6.2                   3.4                2.7

      Deposits from clients       92.6                   83.1                        2.3                   1.7                2.8

      Loans to Deposit  %         141%               147%                     263%               200%          100%

       

       

      In the table above, the ratio of loans to deposits exceeds 100 % in the case of all five banks,  meaning banks loaned out all their Depositors funds and borrowed other funds from other sources to fund further lending.  While the lending situation in Ireland was excessive with ratios around 150%, the credit excesses by the Scandinavian banks in Latvia was worse- at 200% and more.  This excessive lending in Latvia was going on for many years leading up to 2008 and Mr Rimshevics, Governor of the Bank of Latvia, was probably the only voice who spoke out against the unsustainable credit expansion by these banks, predicting economic collapse as a consequence.  Unfortunately, the Governor was not supported by Government and was repeatedly ignored by the Swedish parent banks. It seems that there was very little questioning by these lending banks as to how the Latvian economy could absorb such rapid and continuous credit expansion without creating Asset bubbles, such as happened in the Property sector and in the ballooning of the Trade deficit over those years. We are now dealing with the consequences. Far from being the main culprit in creating the collapse of the Latvian economy, the table shows that Parex bank, lending 100%of its Depositors funds, was clearly not able to keep pace with the credit expansion in the other two large banks.

       

      NAMA in Ireland as the ‘ideal’ solution

      The Irish Government created a completely new State body in Ireland in 2009, in response to the massive loan losses in the Irish banks – it is called the National Asset Management Agency or NAMA. The intention of NAMA is to buy out the Non performing Property related Loans of the Irish banks and to pay for these bad loans with NAMA Bonds, which could be discounted at the European Central Bank for cash. The plan was,  in one move to remove the bad Loans from the Balance Sheets of the Banks and to replace these with cashable Bonds and so put liquidity back into the Irish banks. The aim was to get the Irish banks back lending to the real economy. However, the big public debate surrounded the price which NAMA would pay for individual bad loans, which would be judged to be the current market price of the underlying Property assets backing each loan. The Property market died in Ireland in 2007 / 2008 and remains dead and so there is no way independent market way to measure current values of large blocks of Property assets. In order to protect itself and the Irish State from over paying for Property Assets, NAMA applied a range of Discounts to Loans as high as 80% but on average around 60%. This forced major losses on the selling Irish banks immediately and as a result, it wiped out the Capital bases of the Banks. With very low or nil Capital, the Irish banks were shut out of the International credit markets as international banks refused to lend to the very weak Irish banks. This uncertainty led to large deposits leaving Irish banks very quickly and so today,  Irish banking has virtually stopped  functioning. The creation and workings of NAMA gave no chance to the Irish banks to work out loss situations with clients. This would require working with Borrowers to restructure Loans so that new cash flows would flow into the banks and clients with better prospects, would stay alive until such time as Property prices and International Credit markets recovered to higher levels. NAMA, in my opinion killed all this in a very brutal way. After taking the hits of the NAMA forced loan losses, the Irish State has had to issue New Capital to the main banks to restore the Capital bases and inevitably, this ends up as new Foreign Borrowing by Ireland.

       

       

      No NAMA in Latvia

      Latvia had to face the Credit crisis earlier when Parex bank threw itself on the arms of the State in late 2008. This forced Latvia to act quickly, with the IMF and EU coming to its assistance early in 2009. Because the other major banks, which had over exposure to the collapsing Property prices, were mainly Scandinavian banks with strong Parent banks back home, Latvia did not have to rescue these banks also. It is some form of justice that those Scandinavian banks who drove the rapid Credit expansion in Latvia in the first place, have had to absorb their own losses within their Parent Group structures back home.

       

      The problems of Parex were ring fenced in 2009 through a number of control measures and after serious control and analysis, the Government, with the approval of the EU, split the bank on 01 August 2010 into a Core bank with Performing loans ( Citadele bank) and Parex bank was left with  the Non- core , Non -performing loans. This was done without forcing NAMA style doomsday losses on Parex at the split but instead in allowing time for new independent Management to get to grips with the situation in both post-split banks. This has been a delicate and skilled process which maintained calm in banking circles throughout the process.

       

      This course of action has resulted in Parex now being reorganised into a work out bank with an agreed Business plan to work out assets, mainly loans and other non- core assets in a managed way that aims to maximise the recovery of funds for the State over the life of the approved Business Plan ( until 2017). In my opinion, this is much better than the NAMA course chosen by Ireland which, by forcing the banks to sell assets at extremely distressed price levels to NAMA, has resulted in huge losses being forced on the banks immediately and wiped out capital which has to be restored by the Irish Government through new External Borrowing. Selling assets,  such as property related loans,  into distressed property markets, results in immediate losses because distressed buyers will buy only at very low prices so that they can profit later on, when prices start to recover. In my opinion, it is better to allow the banks, with strong oversight from the State Regulators, to work through the loan problems with borrowers over a reasonable period of time, until markets recover.

       

      I have to add that, it is regrettable, that the new management who have taken on the very tough task of trying to maximise recovery from bad loans from defaulting borrowers in Parex bank, have to put up with constant criticism of their efforts from external commentators and ‘ experts’. It would be more beneficial if these commentators focused on those individuals, who created these problems for the State in the first place, by mismanaging their bank over years, into eventual collapse.

       

      Conclusion

      It is my opinion that Latvia has chosen the correct approach in trying to resolve and manage the banking problems in Parex in an orderly manner and over a reasonable time frame. Working out the bad loans situation will allow time for property markets to recover to better levels than the extremely distressed levels, which exist at present. The IMF / EU programme is already helping Latvia to get its Fiscal affairs into order and we already see growth coming back into the economy. This, in turn, improves the prospects for recovery on bad loans in Parex bank, so as to repay the State Treasury. Ireland under a similar IMF / EU programme is still grappling with resolving its banking problems and while large losses are already taken, uncertainty remains, together with a huge loss of confidence in Irish banking.  It will take many years to repair the damage to the Irish banks as a consequence.

       

      Jan 18, 2011
      Parex bank has turned to Prosecutor General Office of the Republic of Latvia, requesting to submit a protest against the court decision

      Joint Stock Company Parex banka has turned to Prosecutor General Office of the Republic of Latvia with a request to submit a protest against the applied decision of Riga City Vidzeme Suburbs Court of 7 December 2010 wherewith Ieva Plaude-Rēlingere’s insolvency application was satisfied, announcing her insolvency. Parex banka believes that procedural and substantial regulatory norms have been materially violated during review of the case.

      Inter alia, the Court has not assessed evidence submitted by Parex banka regarding I Plaude-Rēlingere’s deliberate and malicious activities as the grounds for insolvency. During the last three years prior to lodging for insolvency, I. Plaude-Rēlingere has carried out a number of transactions with related persons, materially deteriorating her financial situation. Parex banka believes that these transactions have been effected with the intent to avoid performing liabilities and they have substantially injured the interests of I. Plaude-Rēlingere’s creditors. Likewise, Parex banka considers that I. Plaude-Rēlingere has provided incomplete, therefore untruthful, information about her property in the insolvency case. For example, the bank has information at its disposal about substantial assets possessed by I. Plaude-Rēlingere which she has not declared as belonging to her in the plan for sales of and settlements with creditors.

      Parex banka has initiated several proceedings against a number of enterprises in SIA Kolonna group and against I. Plaude-Rēlingere as a natural person. The reason for initiating proceedings is continuous failure of SIA Kolonna and I. Plaude-Rēlingere to perform liabilities.

       

       

      About Parex banka:

      Since 1 August 2010 when Parex banka launched its activity as a solution bank, simultaneously discontinuing to provide such classical bank services as account and deposit services, loans and others, the main goal of Parex banka is to recover State investments to the maximum amount possible. To achieve this goal, the bank focuses its activity on efficient restructuring of loans, debt recovery and management of overtaken real estate. Since 1 August 2010, Parex banka has recovered 60 million Lats which are going to be used for reimbursement of syndicated loan in May this year.

      Jan 11, 2011
      Parex banka recovers 60 million lats within five months

      Despite the weak economic recovery signs detected in Latvia and the world, the joint stock company Parex banka has managed to regain 60 million lats by successful loan restructuring and sale of securities in the first five months of its activity, testifies the financial results of the company. Hence Parex banka has accumulated approximately a half of the resources needed for the syndicated loan repayment. In general the performance of the Bank complies with the estimate and the Bank's restructuring plan approved by the Cabinet of Ministers and the European Commission.

      Christopher Gwilliam, the Chairman of the Executive Board of Parex banka says: “I am really happy because in spite of the adverse external circumstances – instable economic growth and still low prices of real estates and low market activity – by flexible and advised tactics we have reached considerable results. We are aware that in order to reach the goals set for Parex banka we have to use all the available resources – knowledge, skills and know-how.”

      While recovering the state investments, more and more often Parex banka encounters with persistent desire of Latvians and foreigners to acquire assets of the Bank for noticeably reduced value. In such cases Parex banka acts in order to obtain information about the actual interests and honesty of the potential partners in due time.

      “In such events, which are not rare, it is essential to inform the law enforcement authorities and we, of course, do it,” says Mr Gwilliam.

      Parex banka regularly faces situations when some clients and stake holders make deliberate efforts to reduce the value of the assets pledged to the Bank, as well as to conceal their actual financial position. In several cases Parex banka has already launched a successful cooperation with Latvian law enforcement authorities in order to eliminate threats to the Bank and consequently to the state and the society.

      Since August 1, 2010 when Parex banka started its operations as a resolution bank, at the same time discontinuing rendering such typical banking services as account and deposit services, loan issuing and others, the main objective of Parex banka is maximal recovery of the state investments. For meeting the said goals the Bank focuses its activities to effective loan restructuring, debt recovery, as well as management of the real estates taken over.