OREANDA-NEWS. October 26, 2009. On the initiative of Prime Minister Valdis Dombrovskis a discussion was held on cooperation aimed at protection of the only domicile borrowers. Both, the heads of several commercial banks of Latvia and the President of the Latvian Commercial Banks’ Association participated in the discussion. As a result, it was decided to continue the cooperation with the aim still this year to elaborate and sign an agreement between the Government and the commercial banks on regulation of the situation during the crisis period that would consolidate common principles and conditions for loan restructuring, as well as rights and obligations of the parties.

During the discussion, the Prime Minister emphasized that three parties bear responsibility for the current situation – banks, which rapidly increased the lending rates and did not properly assess all the risks, the borrowers, who in certain cases, overestimated their ability to repay the loans and the associated risks and the state, which did not introduce duly measures for credit slowdown and protection of borrowers.

"Now, all the parties must find a compromise solution, which covers two blocks of issues: the current situation of borrowers and solutions to the crisis period, as well as a model for future mortgage lending. No doubt, that while addressing these two issues, the principles of justice must be observed and also the solution for this topical social issue should be provided”, emphasized V.Dombrovskis.

In the course of discussion, the Prime Minister expressed his concerns that the soaring unemployment and termination of payment of unemployment benefits would lead to a substantial increase in overdue loans. Moreover, at present moment, every single bank has its own policy for dealing with overdue credit payments and debt recovery. There are even different solutions to equal situations within one bank which depend on qualification and understanding of a particular crediting expert. This creates uncertainty for borrowers who do not know what to expect when they apply to the bank with their problems, as well as increases the social tension. To avoid the expansion of such negative factors, Dombrovskis extended an offer to the banks’ managers to unify the main principles and conditions under which the restructuring of overdue loans is realized.

With regard to a future mortgage lending model, the Prime Minister proposed to start work on a new mortgage lending law. The drawing of the law is envisaged in the Government Declaration.
This law would regulate a number of issues - the %volume of the credit that may be granted considering the mortgage value, the conditions of loan agreements and mandatory notification of borrowers on the consequences of non-payment.

The meeting with the Prime Minister was attended by Maris Mancinskis – Chairman of the Board of Swedbank, Ainars Ozols - Chairman of the Board of SEB banka, Valdis Siksnis – General Director of Latvia Subsidiary of Nordea bank Finland, Ivars Kapitovics – Member of the Board of DnB NORD bank, Rolands Panko – Chairman of the Board of the LLMB, Olegs Fils – Member of the Board of Aizkraukles Banka, Ivars Prieditis – Chairman of the Board of Latvijas Krajbanka, Druvis Murmanis – Vice President of Parex Banka, Gundars Grieze – Chaiman of the Board of the TKB and Teodors Tverijons – the President of the Latvian Commercial Banks’ Association.