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Tuesday 17.07.2018 | Name days: Aleksejs, Aleksis
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Economic Diary of Latvia. Banks declare war on dummy bankrupts

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUCredit and financial institutions of Latvia suffer losses worth dozens of millions because of abuse of insolvency mechanism. In response to this, bankers have taken arms to combat abuse of this practice by judges, bailiffs and insolvency administrators.

Norvik Bank was the first to be swallowed by this problem this year. Swedbank has joined the fray this week. Latvian Commercial Banks Association completely supports this initiative.

Cases of misuse of the insolvency mechanism are becoming more and more troublesome for Latvians and the country’s economy. Furthermore, this problem has evolved into a clear threat to national security, as stated by Swedbank in its press-statement.

According to Chairman of the Board of Swedbank Maris Bacinskis, Swedbank, as the biggest investor in Latvia, does not understand how judges can review cases without studying them carefully and make formal and completely absurd decisions. This creates the possibility that insolvency administrators can become the people who advise or support the creation of fictive creditors in order to allow their clients to avoid their obligations.

«Every formal decision creates real consequences – crediting conditions worsen and new reputation risks arise for the development of Latvia’s economy. Latvia is losing its attractiveness as a country fit to invest in. Unfortunately, these are not isolated cases, it only shows the flaws of our legal system,» – he explains.

Fraud is common in other countries as well. However, developed countries have countermeasures in place that prevent illegal and criminal attempts to misuse economic mechanisms. Latvia lacks such countermeasures. This is why Swedbank calls to carry out systematic reforms and relieve the country’s legal system from dishonest and unprofessional people.

Detailed information on similar fraud schemes has been compiled by Swedbank, Norvik Bank and Reverta at www.pretkorupciju.lv.

Swedbank intends to take act decisively: a letter with a detailed explanation of the problem has will be sent to all newly-elected Saeima deputies, the government, Bank of Latvia, all law enforcement institutions, Insolvency Administration, Latvian Employers’ Confederation, Latvian Chamber for Commerce and Industry and its foreign counterparts.

Latvian Commercial Banks Association fully supports the initiatives proposed by its colleagues and reminds that many banks have experienced actions by dishonest entrepreneurs. As an example, the association mentions the Norvik Bank versus Winergy case, Swedbank versus Tērbatas biznesa centrs and multiple others.

Support is possible with a big advance

The Latvian government has decided to change the rules of the entrepreneurship support programme ‘Investments with high added value’. This time – in favour of entrepreneurs.

As part of this programme, entrepreneurs can become eligible for modernization of production. Equipment suppliers, on the other hand, often request to be paid in advance in order to avoid having the order cancelled.

In order to make life easier for entrepreneurs, the programme will allow the allocation of advance payment worth 35% or 90% of the project’s cost as long as authors of the project can prove that this money can speed up the project’s realization and create new jobs.

It is worth mentioning that this advance payment will only be provided with proof of bank guarantee (banking commission for the provision of the guarantee will be compensated at the expense of the programme).

With that, Investment and Development Agency of Latvia encourages all interested entrepreneurs to apply for reception of this advance as part of the ‘Investments with high added value’ programme.

According to this institution, the government and entrepreneurs have invested a total of EUR 650 million in modernization of their production over the past five years.

Entrepreneurs were provided with more than EUR 229 million as investments in projects with high added value and another EUR 38 million for the launch of new production lines during the EU fund planning period of 2007 – 2013.

Producer prices remain nearly unchanged

During nine months of 2014, producer prices have declined 0.1%, as reported by Latvian Economy Ministry. Prices on products have reduced by 0.3% for the domestic market and have increased 0.1% for export goods.

The largest growth was noted with producers of wooden products – +1.7%: changes have been noticed in the domestic and external markets.

The general index has declined under pressure from prices on food products (-1.1%). The largest decline in segment was noted in September.

The most rapid decline of prices was noted in the segment of computer, electronics and optical equipment producers – 15.5%.

The main factor in the decline of prices was the Russian embargo and the state of relations between the EU and Russia. The latter factor will be decisive for future developments in price policies. A decline in prices on energy was noted on global markets this September. There was also an increase in the prices of agricultural goods, as noted by analysts from Latvian Economy Ministry.

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  1. Brian says:

    Why has it taken so many years after independence for Latvia to bring in laws that combat everything from corruption in the ports to problems with the banking system, as detailed in this story.

    Just what have the politicians been doing for the past 20 years ?

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