Latviski English По-русски
Saturday 23.06.2018 | Name days: Līga

Latvia Finance Ministry: banks irrational lending fear delays EU funds acquisition

(No Ratings Yet)

ME Deputy Secretary Andris Liepins

The Ministry of Finance (MF) believes the European Union (EU) fund acquisition in Latvia is delayed by banks’ irrational fear of crediting, while banks emphasize they are ready to talk with both the MF and the Ministry of Economy (ME) about the creation of new support instruments, for instance, additional state guarantees or introducing the mezzanine financing model.

As the ME Deputy Secretary Andris Liepins (Andris Liepiņš) pointed out in the discussion organised by, one of the reasons why Latvia faces difficulties in EU fund acquisition, is because banks delay co-financing for the approved projects. The Deputy Secretary also stated that over the past three quarters the balance of loans issued to the manufacturing industry, in which the ME has particular interest, has decreased by 15%.

«Although banks claim they have become more proactive; however, the statistics show the volume of granted loans has dropped from approximately 1.15 billion lats last year to about 900 million lats this year. At the conditions of good liquidity and growing deposits there is more money in banks, yet it is issued insufficiently. The most aggravating thing is that the Swedish banks are reducing their market share, which played more active role in lending in 2006 and 2007,» said Liepins.

The MF Deputy Secretary Aleksandrs Antonovs holds a similar view on the issues concerning the EU Structural and Cohesion Fund, indicating that, perhaps, it is due to banks’ irrational fears, similarly as few years ago banks demonstrated irrational boldness to provide loans.

«Within the framework of several programmes, the bank specialists in particular were the ones who set the financial criteria, which the Latvian Investment and Development Agency (LIDA) could not carry out due to lack of resources. Also the Association of Latvian Commercial banks (ALCB) was involved in this work process. Therefore, such criteria were created that facilitated approving projects and allowed the LIDA to conclude agreements. After the conclusion of contract, entrepreneurs had to go to banks with their projects to receive loans, because they had previously gotten a statement from the bank that the particular project will be financed. However, after the project approval at the LIDA, banks suddenly declared they would not finance the project. I do not think that the ME could be blamed for the lack of communication with the businessmen, as industry representatives are involved in the project assessment process,» pointed out Antonovs.

The Head of AS Swedbank State and Municipal Customer Service Department Ilze Kukute informed that during the nine months of this year Swedbank has granted new financing at the extent of 85 million lats, and in response to Liepins question if the credits were issued to residents of Latvia – she specified that from the newly-issued loans 80% or more than 70 million lats was granted specifically to companies.

While, the Head of the ALCB EU Structural Fund Committee and the VAS Latvijas Hipotēku un zemes banka Project Development Department Aleksejs Kanejevs (Aleksejs Kaņējevs) indicated a bank is a huge mechanism which cannot be changed as one wishes; however, the state could fuel this mechanism with support instruments.

«If guarantees, as the support instrument for the new projects funding, are not effective, another instrument should be sought. For instance, France has an operating model where commercial banks fund investments, but provide financial support for the working capital within the framework of the state programmes, and this share is perceived as an enterprise capital, which is a type of mezzanine financing, namely, something between a venture capital investment and loan. However, it is possible to restructure this loan at a company by means of state-monitored instruments. Currently, there is a gap between the risk capital and standard bank loans. Yet the mezzanine financing could be the solution,» emphasized Kanejevs, while Liepins also pointed out that mezzanine funding is one of the instruments that could be introduced.

Kukute drew emphasis to the fact that banks are prepared to talk with the ME about how to supplement the support instruments, while Liepins pointed that the corporate strategies of «the four great» banks – Swedbank, AS SEB banka, AS Nordea banka and AS DnB Nord banka– are not drafted for their subsidiaries in Latvia; consequently, the government will have to communicate with Scandinavian banks parent companies more actively regarding ways how to solve the issue of the lending problems.

As reported previously, Latvia falls behind from its set aims of the EU fund acquisition, paying out only about 30% in the eight months of 2010 of the whole intended financing volume of this year, indicated the MF report.

Overall, until August 31, the EU fund projects were approved at the extent of 1.963 billion lats or 61.7% of the EU fund financing. Agreements for 1.85 billion lats have already been concluded, and the financing receivers were paid 611 million lats or 19.2% of the available EU funding.

According to the MF estimates, currently there are concerns that 73 million lats will not be acquired this year, of which 40 million lats were scheduled for the programmes managed by the Ministry of Economy; therefore, it was suggested that the financing should be reallocated.

The government supported 34 million lats reallocation for the programmes under the Ministry of Transport responsibility, while additional 18 million lats will be directed to the Ministry of Environment. Additional funding will be also channelled to several programmes managed by other ministries.

Leave a reply

  1. rut says:

    Hey, but he looks quite handsome..

SRS uncovers numerous violations more than half of inspected companies

State Revenue Service’s Tax Control Office performed a total of 305 thematic inspections of employers in Latvia in Q1 2018. Authorities recorded violations in 171 inspections, according to information from SRS.

Third level pension plan deposit volumes reach new record value

Residents’ interest for pension savings remains high. The volume of deposits made to private pension funds in the first three months of 2018 has reached a new historic peak: a total of EUR 16.5 million has been paid to 3rd level pension accounts, which is 11.6% more when compared to the same period of 2017, as reported by Finance and Capital Market Commission.

Petrol station network in Latvia caught performing fraudulent activities with diesel fuel

State Revenue Service’s Tax and Customs Police have uncovered and put an end to a fraudulent scheme with diesel fuel performed by some network of petrol stations in Latvia, as confirmed by the service.

Kaimiņš: I believe CPCB is performing a political order

In the evening of Thursday, 21 June, Corruption Prevention and Combating Bureau released three people previously detained as part of a criminal process regarding possible illegal funding of KPV LV party – Saeima deputy Artuss Kaimiņš, his colleague Atis Zakatistovs, and businessman Viesturs Tamužs.

Latvia’s parliament conceptually supports new sanction regulations

On Thursday, 21 June, Saeima supported in the final reading amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia that are meant to improve sanction regime regulations to ensure efficient application of national and international sanctions, as reported by Saeima press-service.

Storm in Tallinn floods streets, cuts Croatia-Argentina match short on TV

A rain storm has hit northern Estonia on Thursday, flooding some streets in the capital Tallinn, damaged buildings and badly affected the broadcast of an interesting World Cup game.

American banks tested for financial stress show positive results

The U.S. has performed banking stress tests and found that the 35 largest banks operating in the country have enough funds on hand to sail safely through a severe financial crisis.

Saeima fires judge for coming to work in a drunken state

On Thursday, 21 June, Latvia’s parliament supported the proposal to dismiss Rezekne Court judge Arvis Garais from his post. 71 deputies voted in favour, no one abstained and no one voted against.

UK to have three requirements to EU citizens willing to remain in UK

For citizens of the European Union willing to continue living in the UK after the country leaves the bloc, they will have to submit applications and answer three key questions over the internet, according to the country's interior minister.

Weather in Latvia to be rainy and cool during Ligo; next week’s weather to be dry and hot

Weather at the end of the week in Latvia will be dictated by a cyclone. Because of that, there will be instances of rain on Ligo. Weather is expected to improve next week, however, according to Latvia’s State Environment, Geology and Meteorology Centre.

Lithuania’s blood plasma corruption scandal extends to Latvia

The former head of Lithuania‘s National Blood Centre, suspected of corruption and involvement in unlicenced activity, received more bad news this week from Latvia, where investigators of the Lithuanian Special Investigation Service had questioned the Latvian Health minister, Anda Čakša.

Administrative burden to be reduced for foreign students and researchers

The administrative burden will be reduced for foreign students and researchers, as well as all education and research institutions hosting them. This is provided by the amendments to the Immigration Law approved by the Saeima in the third reading on Thursday, 21 June.

Latvian Economy Minister endures no-confidence vote

Saeima declined opposition deputies’ request for dismissal of Economy Minister Arvils Ašeradens.

Swedbank economist becomes new member of Bank of Latvia Council

On Thursday, 21 June, Latvia’s Saeima approved Mārtiņš Kazāks in his new post as member of Bank of Latvia Council, as confirmed by Saeima’s press-service.

Pope Francis’ visit to Latvia will be a national holiday

Latvia’s parliament has approved in the final reading a law that makes 24 September – the day Pope Francis plans to visit Latvia – a national holiday.

ICT specialist numbers in Latvia are below Europe’s average level

In Latvia, information and communication technology specialists form only 2.2% of all employed people in the country, which is considerably below the average level in the European Union – 3.7%. Romania and Greece are the only two EU member states in which the number of ICT specialists is below Latvia’s, according to European Commission’s DESI index.

Hungary adopts prison sentence for helping migrants

Hungarian National Assembly has passed a set of laws criminalising with prison terms some help provided to illegal immigrants by non-governmental organisations.

Harmony plans turning to Constitutional Court to prevent transition to Latvian language in schools

«Why should this reform stay unrealized? It is because schools are not prepared for cardinal changes coming from dozens of other reforms that have already shocked the country’s entire general education system,» says chairman of National Minority School Parents Forum and member of Harmony’s work group in Konstantīns Čekušins.

Deputies detained in KPV LV criminal case not declared suspects yet

Saeima deputy Artuss Kaimiņš and businessman Viesturs Tamužs detained in the criminal process regarding possibly illegal funding of KPV LV party have not yet been declared suspects. Both are currently in police custody. It is likely Kaimiņš will be released later today, 21 June.

Production of mines and grenades planned in Estonia

As the Estonian parliament has adopted new rules on military arms and ammunition production in the country, local defence firm Eesti Arsenal has voiced its plan to build a factory in Estonia to make military explosives.

Total tax debts in Latvia reached EUR 1.224 billion in June

At the beginning of June, total tax debts in Latvia, including topical, halted debts and extended repayment terms were equal to EUR 1.233 billion, which is 0.6% less compared to May, as reported by State Revenue Service.

Switch off internet nationwide during exams – Algerian approach

In an attempt to prevent cheating during secondary school exams, the north African nation Algeria, has turned off internet in its whole territory.

Control Service proposes kicking out shell companies as intensely as offshore companies

Shell companies in Latvia should be combated with the same intensity once shown to offshore companies, says chief of Anti-Money Laundering Service Ilze Znotiņa.

EU imposes tariffs on blue jeans, motorcycles and other U.S. export goods

The European Union will introduce retaliatory tariffs against U.S. exports on Friday, EU Trade Commissioner has stated a top official has stated in the bloc's reaction to Washington imposing steep duties on steel and aluminium earlier in June.

Latvia’s Saeima proposes improving job-combining rules for state officials

On Wednesday, 20 June, Latvian parliament’s Public Administration and Local Government Committee decided to submit for review amendments to the Law on Prevention of Conflict of Interest in Activities of Public Officials.

Newest comments