EU examines Latvia bank bail-out

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European Union regulators have begun an investigation into the rescue of Latvia's second biggest bank - JSC Parex Banka.

The investigation will consider whether the bail-out and restructuring plan would help it recover without giving it an edge over rivals.

The Latvian government injected 200m lats (£245m; $401m) and gave loan guarantees to save it from collapse.

The European Bank for Reconstruction and Development also made a loan.

EU Competition Commissioner Neelie Kroes said the investigation would determine whether the aid package for Parex Bank would address its problems.

"The Commission now will examine whether the restructuring plan will enable Parex to return to long-term viability while avoiding undue distortions of competition," the EU executive said.

Until recently, the tiny Baltic state was a star performer in Eastern Europe, with a high growth rate.

But the country has been hit hard by the economic crisis.

The government sought a bail-out from both the EU and the International Monetary Fund. Its economy is forecast to shrink 18% this year.