The Latvian government has taken over the country’s second-largest bank in a move it says is meant to protect taxpayers and bank customers.

Prime Minister Ivars Godmanis on Nov. 8 announced the government’s decision to take a 51 percent share in Parex Banka, according to media reports. The bank has more than 400,000 retail customers.

Finance Minister Atis Slakteris told journalists that in taking the decision, the government acted in the interest of taxpayers and bank clients. Parex, according to media reports, has experienced a recent drop in assets and could have faced bankruptcy.

“This responsible step is a signal that points to the government’s ability to act and decisiveness,” he said in a statement to the press. “The bank sector is especially important to the country, because it forms the lifeblood of the nation’s economy.”

The decision comes after weeks of speculation and warnings about a looming economic crisis in Latvia. The leading financial ratings services, most recently Moody’s Investors Service, have all cut their outlooks for Latvia.

“The global liquidity crisis will probably cause a shock to the Latvian banking system, which will reverberate throughout the rest of the economy,” Moody’s Senior Analyst Kenneth Orchard said Nov. 7 after the service downgraded Latvia’s currency rating. However, Moody’s noted that the presence of several large Nordic banks should offer stability to the Latvian market.

The Latvian government’s share in Parex will be controlled by the state-owned Hipotēku un zemes banka (Mortgage and Land Bank of Latvia).

Just weeks ago Parex reported a LVL 12.4 million profit for the third quarter of this year. With assets standing at LVL 3.14 billion at the close of third quarter, Parex is Latvia’s second-largest financial institution, according to the Latvian Commercial Bank Association. No. 1 is Swedbank, with LVL 5.12 billion in assets, while No. 3 is SEB Bank with LVL 2.99 billion. Hipotēku un zemes banka is ranked No. 8 with about LVL 959 million in assets.

Parex was established in 1992 and has been controlled by Valery Kargin and Vladimir Krasovitsky. It has offices and affiliates in 14 countries.