The Latvian government is set to increase its stake in Parex Banka, the country’s second largest bank, to 84 per cent in order to reassure depositors, creditors and the International Monetary Fund.

The agreement, reached late on Tuesday, nationalises the last big independent Baltic bank, taking the state’s stake up from 51 per cent, and marks the collapse of the empire of Valery Kargin and Viktor Krasovitsky, once Latvia’s richest men.