Riga - The European Bank of Reconstruction and Development (EBRD) confirmed Tuesday that it will buy a quarter stake in nationalised Latvian bank Parex.

The EBRD said it would acquire "25 per cent plus 1" of ordinary shares of Parex Bank for 84.2 million euros (111 million dollars) and extend a "subordinated loan" of 22 million euros (29 million dollars).

In the statement, the EBRD said the deal was subject to "the conclusion of legal documentation."

The investment would be an opportunity for the EBRD to contribute to the restructuring of Parex and "support the real economy in Latvia," the organization said.

The statement added that the EBRD supports the future return of Parex to the private sector.

"Our involvement would contribute to a return in confidence in the bank and in Latvia's financial sector generally," said the EBRD's Varel Freeman, who had signalled the EBRD's readiness to invest in Parex during a visit to Latvia in March.

Parex Bank last week reported net losses of 232 million dollars for 2008.

Parex remains the largest home-grown bank in a Baltic banking scene dominated by Scandinavian financial groups. Its near-collapse shocked the region after it had spent years as a high-flying bank with an ability to attract sizeable deposits from rich Russians as well as local clients.

Founders Valery Kargin and Viktor Krasovickis sold their 85 per cent stake to the Latvian state for just 1 lat (1.80 dollars) each.

Prominent local businessman Nils Melngailis was put in charge and has so far proved effective in improving Parex's prospects by striking revised deals with syndicated lenders and helping to get the EBRD on board.

The EBRD has invested in various other businesses in the Baltic region and already owns a minority stake in Lithuania's Siauliu Bank. (dpa)