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ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora
The Bank of Lithuania is preparing new regulations for credit institutions to ensure a responsible loan environment. These regulations should come into force in October 2011. The credit institutions in the past have granted loans without analysis of the financial status of the debtor. These actions played a part in the economic crisis. Most debtors were not able to fulfill their duties according to credit agreements. The credit institutions should assume some of the responsibility.
New regulations should clearly determine the relation between the credit amount and the financial status of the debtor. The situation where the credit institution grants a loan, which is in the amount of 100 percent of the acquired property, is strictly limited in the new regulations. According to the new regulations the credit institution will not be able to grant a loan which has an amount greater than 85 percent of the acquired property. This restriction would be valid for natural persons. The loans for real estate companies should not be higher than 80 percent of the amount of the constructing properties (for the construction of dwellings – houses) and not higher that 75 percent for commercial construction.
New regulations also declare that the maximum amount of the monthly payment should be 40 percent of the debtor’s income. Before the loan is granted, the credit institution should analyze the income of the debtor over a period of at least 6 months. The credit institution should clearly determine the solvency of the debtor, not only at the current moment, but also during the duration of the validation of the credit agreement. The debtor would also be able to repay the loan earlier, without any additional payment (except necessary expenses of the credit institution).
All of these new regulations will be only recommendatory and there are no sanctions in the case of non-observance. So, the realization of these regulations depends directly on the credit institutions.