Latvian Bank Account

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30 May, 2010

FCMC Board decided to revoke the credit institution operating licence of the JSC ‘VEF banka’ dated 21.02.1992. It was pointed out that withdrawal of the licence has no relation to the bank’s insolvency, but to the fact that ‘VEF banka’ shareholders have not received authorisation from the Commission for the acquisition of qualifying holding. According to the Commission, as a result of bank’s failure to ensure compliance with provisions of the Credit Institution Law, the shareholders had no decision-making rights and were unable to ensure bank operations.

In accordance with FCMC Board’s decision to cancel its licence, the JSC ‘VEF banka’ is prohibited from executing any transactions and cash payments, as well as disposing of its property, archives, files and particular documents.

The Commission will file a petition for liquidation of the credit institution to the Riga Regional Court and the appointment of the administrator for liquidation. Until the appointment of liquidator, the Commission will appoint its authorized representative for the bank.

15 July, 2010

The Bank of Latvia kept its benchmark refinancing rate at 3.5 percent, it remained unchanged after lowering three times in the last 16 months. The Bank cut its 7-day deposit rate to 0.5 percent, and lowered the overnight deposit rate to 0.375 percent from 0.5 percent. Since March 2009, the bank has cut the main rate a total of 2.5 percentage points.

By words of Nordea Bank analyst, the goal of the Latvian bank to promote lending by lowering the deposit rates is difficult to achieve. ‘The main obstacle to credit growth is the weak health of the economy and the comparatively small number of quality borrowers,’ he said.

3 August, 2010

In a EU-wide stress test mandated by the Economic and Financial Affairs Council of the Committee of European Banking Supervisors (CEBS) in cooperation with the European Central Bank, the European Commission and the EU national supervisory authorities, Latvian banks showed good results, according to the Latvian Ministry of Finance.

The purpose of this stress test was to evaluate the vitality of the biggest European bank groups under different economic development scenarios. Testing results showed that Scandinavian and Italian banks acting in Latvia exceed regulatory minimum of 4% Tier 1 capital. For example, Nordea banka showed 10.1 to 11.3 %, Swedbank — 9.9 to 10.7 %, Danske Bank — 10 to 11.7 %, SEB — 10.3 to 11.8 %, and Unicredit — 7.8 % to 10 %. According to these very good results, all these banks would be able to ensure successful and stable performance potential in case of crisis and economic downturn.

17 September, 2010

This week, EU’s executive approved the breakup of Parex, which was once the largest bank in Latvia with assets valued at 3.4 billion lats, and then was nationalized in a state rescue. Now the Latvian government plans to break the bank into two divisions — a commercial bank named ‘Citadele’, and Parex, — the first one taking over viable assets of the bank, and the second taking its devalued assets.

According to the statement of the European Commission, that plan will provide for the long-term viability of Citadele, allowing for an orderly realisation of the assets remaining in Parex. Citadele is expected to hold around 1.5 billion lats in assets and will focus on business in the Baltic countries. The new bank will operate under strict EU-imposed limits on lending and acquisitions. Parex will gradually sell off its assets, using the fund raised to pay back the government.

24 September, 2010

According to the update on Latvian bank performance in August 2010, published by the Financial and Capital Market Commission, at the end of August the liquidity ratio in the banking sector was 65.5%, while the capital adequacy ratio reached the highest level over the last ten years and was 15% at the end of this period.

The Commission informed that, from the beginning of 2010, ten banks increased their capital in total by 253.3 million lats, and at the end of August paid-up share capital in the banking sector was 1.85 billion lats.

In the first eight months of 2010, seven Latvian banks and two branches of foreign banks (which make 11.8% of total banking sector assets) announced profit earning of 7.1 million lats. However, total loss of the banking sector at the end of August was 455.4 million lats.

It was forecast that total losses in the banking sector in the year 2010 would make approximately 500 million lats, as compared to the year 2009, when they made 773.4 million lats. At the end of August 2010, the banking sector profit (before provisioning and tax) accounted for 96 million lats.

By the end of August 2010, the amount of deposits in the Latvian banking sector was 10.4 billion lats, that is, 2.6% more than by the end of July.

Loan portfolios of 11 Latvian banks and three branches of foreign banks increased in August. In that month, new loans in the amount of 90 million lats were issued in the banking sector overall.

By the end of August, the amount of loan loss provisions in the banking sector was 1.7 billion lats, or 11.4% of total bank loan portfolio — the same percentage as in the previous reporting month.

2 October, 2010

Mortgage Bank (Hipot─ôku banka) signed an agreement with the European Investment bank, on the allotment of 100 million Euro financing to the promotional programme ‘Regulations on lending for promotion of development of micro, small and medium entrepreneurs and agricultural cooperative companies’.

The programme is approved by the Cabinet of Ministers. Mortgage bank will receive the loan from the European Investment bank upon approval of the State guarantee.

26 December, 2010

The Financial and Capital Market Commission published information on the performance of Latvian banks in November 2010. Performance results of Latvian banks in November 2010 remained high. Capital adequacy ratio was 15.2% at the end of this period — the same as at the end of October 2010. The banking industry ratio was 64.4% (as compared to last month’s 66.4%). Tier I capital ratio also remained unchanged and made 12%.

In the first eleven months of 2010, the banking sector profit before provisioning and tax amounted to 136 million lats. Expenses on loan loss provisioning, which made almost 470 million lats by the end of November have been main reason for total losses in the banking sector this year

In November 2010 the amount of new loans issued in the banking sector made up 116 million lats., 77 of them issued to residents. Loan portfolios of 17 banks increased.

14 Latvian banks have increased their overall capital by 300 million lats and at the end of November paid-up share capital in the banking sector accounted for 1.88 billion lats.

1 March, 2011

According to the information published by the Financial and Capital Market Commission, in January 2011 the Latvian banking sector returned to profit after the losses of the past two years. This January, 15 Latvian banks and five foreign banks branches operated with profit, which amounted to LVL 10.9 million.

Last time banking sector operated with profit was January 2009. In January of last year, Latvian banking sector posted LVL 36.1 million in losses.

In 2010, Latvian banking sector’s total losses amounted to LVL 360.6 million, which is 53.4% less than in 2009, when losses made LVL 773.4 million.