Mortgage Bank to be reorganized

  • 2010-05-26
  • From wire reports

RIGA - The Finance Ministry has completed work on a plan for transforming  the state-owned joint-stock Latvian Mortgage and Land Bank (Latvijas Hipoteku un zemes banka) into a Development Bank, reports news agency LETA. The concept stipulates that a development bank will be established on the basis of Mortgage Bank by the end of 2013, the Finance Ministry’s Communication Department head Baiba Melnace reported.

The European Commission gave the green light to the establishment of the development bank on November 20 last year. The goal is to establish a development bank for implementing state aid programs, making maximum use of the Mortgage Bank’s infrastructure, intellectual and financial potential. The Development Bank will be in charge of implementing state aid programs and supplement the services offered by commercial banks, instead of competing against these banks.

In a letter of intent signed with the International Monetary Fund on January 22 this year, Latvia resolved to pass the Mortgage Bank revamp strategy by the end of this year, with the strategy outlining specific reorganization measures, their terms and sources of funding. Pursuant to the strategy, the commercial segment of the Mortgage Bank will be gradually reduced until December 31, 2013.
Non-performing assets of the Mortgage Bank will be transferred to a subsidiary so as to make operations with non-performing assets more effective, and consider privatization of these assets or handing them over to the public sector.

During the transition period, the Mortgage Bank branches will be identified, and would become branches of the Development Bank after the reorganization is over; these branches will be located in regional centers of Latvia.
The commercial segment customer service system of the bank will be gradually reduced, and what later remains of it will be either nationalized or transferred to another financial institution offering commercial services.

It is planned that as a result of the reorganization, the Development Bank will each year implement new aid programs worth 70 million lats (100 million euros) in accordance with the government’s priorities in the following sectors: funding small and medium-sized enterprises, funding business start-ups, promoting micro-companies and employment, funding high value-added projects, funding the production of competitive goods and supply of competitive services, funding energy efficiency measures, funding rural development projects, encouraging employment, and others.
During the transition process, the bank will continue servicing all of its existing clients and will honor all of its obligations.