Saturday , November 28 2020

How did the money flow? / Article / LSM.LV



In order to avoid the collapse of the financial system, the government decided to spare Parex banka 10 years ago. In seeking the right method, politicians relied heavily on the views of the Bank of Latvia, including the issue of not limiting the outflow of money. However, government intervention did not provide complete stability. In a short time, customers took almost 560 million euros from the bank, announcing the LTV transmission "De facto".

Summing up:

  • First, the owners of Parex asked the government to deposit money.
  • Godman: In the first conversation ended with no, the government did not have the money.
  • Skele also participated in the conversation, he also thinks now – there was no need to spend public money.
  • Management did not inform the FCMC about the negotiations.
  • Godmanis: Rimšēvičs did not inform the government about the loan from the Bank of Latvia to Parex Bank.
  • Godmanis: Rimsevich was the one who recommended the state to take over the bank.
  • The direct and indirect losses without saving the bank would be 3 billion lats, LB estimates later.
  • The government did not impose a limitation on the withdrawal of money.
  • Following the announcement of the acquisition on November 8, customers began to withdraw money.
  • The restrictions were established on December 1, when 395 million lats were already flowing.
  • Exceptions to restrictions and also to state and municipal government institutions and enterprises were the main obstacles.
  • Economist Mortens Hansen questions the accuracy of government action.

Godmanis: Rimšēvičs advised to take over the bank

The first conversations about Parex's aid began in October. The owners of the bank, Latvia's wealthiest people, Valērijs Kargins and Viktors Krasovickis, applied at the time of head of government Ivars Godmanis. He could not accept them immediately, but after some time the meeting was held. Both asked the government to deposit money into the bank.

"The first conversation ended with no," recalls Godman. He explained that the government did not even have the money to refinance its accounts.

In addition, the owners of Parex could not offer anything worthwhile in exchange for money.

The first conversation was attended not only by officials, but also by outsiders. For example, Prime Minister Andris Šķēle, whose role in this process is still uncertain.

Slack responded to the de facto message that they now feel that "the greed and risk taken on by foreign financiers in buying Parex's lucrative bonds / bonds did not have to be paid by public means."

The Banking Supervisors and Financial Markets Commission (FCMC), which at that time paid attention to Parex, did not inform the bank at the time that the bank's shareholders wandered around and demanded money.

"Actually, they did not let us know, they went to the Ministry of Finance," said Jan Placis, former director of FCMC's Supervision Department.

However, the head of government also ignored this. The second meeting was held with Godmanis with the shareholders of Parex on the governor of the Bank of Latvia Ilmar Rimsevich. "At that time, the president of the bank [Rimšēvičs] I did not say that the Bank of Latvia had already lent to Parex enough against badges. He did not inform us, "said Godmanis.

According to him, Rimsevich was the one who advised the state to take over the bank: "The initiative came from him [Rimšēviča]that for two seconds the government has to enter.

At that time, Finance Minister Atis Slakteris publicly stated that buying a controlling stake "Parex" for two lats is his idea.

Thoughts about restrictions were shared

In Latvia, at that time, there was no law of bank acquisition, so shareholders had to agree. For the negotiations, the government delegated Slakter to a closed meeting. The ministers decided that banks can not be saved. The president of the Bank of Latvia called for the change. "The bankruptcy of a major financial market operator would undeniably have a significant negative impact," Rimsevich wrote to the government.

In the event of bankruptcy, the budget quickly gave depositors about 600 million lats, and that was not all. Direct and indirect losses, without saving the bank, totaled three billion lats, later calculated by the central bank.

One of the most important issues in which thoughts were shared was the imposition of restrictions. Parex shareholders called for restrictions, was supported by FCMC, but Rimšēvičs was against, which he believed "would be the biggest shame." If at the same time the state buys a bank, then it would be strange to restrict it – such was the position of the Bank of Latvia.

Godman said that in a situation where the FCMC was in a position, the central bank was different, the government had to come to a common view.

A meeting of the People's Party was held in front of the government's acquisition of Parex, which included an informal discussion on Parex. Thinking that no matter how the government should deal with Rimsevich's opinion, including imposing restrictions on the bank. He was questioned by Finance Minister Slakter at the prosecutor's office.

The government has decided not to put restrictions immediately but to keep track of how the money will be withdrawn. "It was a familiar medium," explained Godmanis.

On November 8, the Office assumed Parex under state control, acquiring a symbolic rate of 51% of the shares. The government announced publicly.

After the public announcement of the acquisition, it is time to withdraw money

If, by government decision, the money was withdrawn from the bank by Latvian clients based on rumors, then everyone was informed by the public announcement of Parex's problems. And the bank is dumped too fast.

At the end of November 2008, the Secretary of State of the Ministry of Finance wrote to the government that 492 million lats had left the bank since the end of September,

the majority of which – 395 million lats – flowed within two weeks and a few days after the government's decision to intervene.

However, on December 1, restrictions were imposed, however, they predicted a large number of exceptions.

As a result, state and local government institutions and businesses are also outdoors.

"As if we were going inside the bank with the idea of ​​stabilizing, but the company leaders said our first interest was our companies, and they also took their money," Godmanis said.

If the restrictions are corrected more quickly, the government will not be forced to immediately put so much money into the bank. However, this does not reduce the total amount of aid, says FKTK spokesman Jānis Placis. "The rescue model was such that everyone ended up getting everything," Placis explained.

He also suspected that "financial market professionals who put money into a private bank have gotten it all back."

They question the accuracy of government action

The Latvian government had to ask international creditors to help both the state budget and the banking system. While US correspondents leaked from WikiLeaks, the International Monetary Fund (IMF) insisted that Kargin and Krasovicki leave the bank altogether.

Before that, the government had left both the partial owners and the board members to encourage the largest partners in Parex.

"I remember very clearly that the International Monetary Fund (IMF) considered that the agreement with former Parex owners was not a fair agreement, as it gave homeowners the opportunity to rescue their banks. But the Latvian government took all risks and received any compensation, "recalls former US ambassador to Riga, Charles Larson.

Mortens Hansen, Head of Economics at the School of Economics at the Stockholm School of Economics, is quite skeptical of the government's "Parex" bailout.

"Over the years, the idea has evolved not to save the banks, but to force shareholders and owners to pay for it." Latvia acted differently.These were unsafe times and can be fully accepted.

Was it really right to save Parex quickly and force taxpayers to pay for it? I'm not sure I was right, "Hansen acknowledged.

There are different ways of calculating how much money Parex's budget has not recovered. In calculating the State aid method, including non-repayable guarantees, Latvia contributed mostly with Parex in 2009 to EUR 1,7 billion. This year's state contribution stood at 650 million. In turn, 350 million of the state received from the payment of bank interest.

However, according to the method, how much money was actually poured into the bank, about 430 million euros were not received back.


Source link