Riga  - Parex Banka, the Latvian bank that was forced into public ownership in late 2008, is to be the subject of an "in depth investigation into state support measures" the European Commission confirmed Wednesday.

"This is a first step towards finding a viable long-term solution for the bank," the Commission said in a statement.

The Commission added that the opening of an investigation is common for state interventions in the banking sector. Competition Commissioner Neelie Kroes said: "The Commission has to carry out an in-depth investigation into the aid package for Parex Banka to determine whether it is accompanied by a realistic project to address the problems that led to the current situation."

Parex remains the largest home-grown bank in a Baltic banking scene dominated by Scandinavian financial groups. Its near-collapse shocked the region and took the Latvian state to the verge of bankruptcy 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 (2 dollars) each.

The rescue of Parex was one of the factors that forced Latvia to seek a 7.5-billion-euro (10.6-billion-dollar) aid package from international lenders including the European Union, International Monetary Fund and World Bank.

A 1.2-billion-euro payment was made from the EU to Latvia on Monday, with half the total amount earmarked for support of the financial sector.

Prominent local businessman Nils Melngailis was put in charge of Parex after nationalisation and has so far proved effective in improving Parex's prospects by striking revised deals with syndicated lenders and helping to get the European Bank of Reconstruction and Development to invest in the bank in a deal due to be completed next month.(dpa)