Lending Policy for 2011

Dear customers!

We herewith inform you about the Banks lending policy for 2011. 

Granting of new loans

The Bank continues granting of loans giving preference to:
regular customers of the Bank with a good credit history;
customers of the Bank whose activities are aimed at business development;
priority funding areas.

In working with its customers the Bank applies an individual approach to each customer and prepares individual lending conditions to meet each customers wish and to comply with the requested loan type, loan purpose and other conditions.

The Bank focuses on short-term business lending. The maximum lending period is agreed with the customers for each loan separately depending on:

loan type;
loan purpose;
loan repayment procedure;
loan repayment sources;
structure of the resources available to the Bank ;
paying capacity and planned cash flow of the Bank customer;
loan collateral type and quality;
other conditions of the project for using the loan. 

Loans are issued in EUR, EUR and USD.

One of the Banks priority funding areas in 2011 is International factoring according to the two-factor scheme of FCI (the International Factoring Association “Factors Chain International”, whose member the Bank has been since 2004), as this type of funding has several advantages: 
 

International factoring funding is the provision of working capital to customers whose main focus is promotion of export and manufacturing, which in the current economic situation is a top priority of Latvias economy.

The volume of International factoring funding basically depends on the purchasing capacity of debtors, so even a relatively young and small company can have access to this type of funding to trade with large and solvent companies. Besides, only in export factoring the sellers own risk according to the FCI scheme is 0%;

As collateral for international factoring funding serve guarantees of factoring companies in the amount of 100% (a guarantee of lesser percentage may be granted with rare exceptions) of customers accounts receivable where the maximum limit is determined depending on the debtors solvency status. Consequently, this type of collateral is less risky than, for example, collateral of customers assets or real estate, and it is not affected by currency fluctuations, depreciation of customers asset, etc. Even in the event of deterioration of customers solvency, the reduction of guarantees is never retroactive.

To receive the International factoring funding, the customer is not required to provide a pledge - thus neither customers business activities nor customers opportunity to freely handle the property are restricted, and the Bank does not need to apply enforcement of pledge.

In 2011, the Bank is planning to provide the international factoring funding according to the FCI two-factor scheme to companies from all sectors of the economy if the Bank partners (FCI Factoring companies) approve such limits on transactions with Customers debtors that are acceptable to Bank customers.  

Extension of a loan repayment period

If a need arises, the Bank offers its customers the option to extend the scheduled loan repayment period. 

Having received from a Bank customer an application for extension of a loan repayment period, the Bank evaluates:

1. reasons for extension of a loan repayment period;
2. projected business cash flow, which was presented prior to granting a loan, in comparison with the actual business cash flow, as well as assesses the factors preventing the customer from achieving the projected cash flow;
3. solvency of the customer by analyzing actual financial indicators of business activities (operating balance sheet, profit and loss statement), as well as planned (expected) cash flow and its adequacy for the next period of credit use; business performance and prospects;
4. creditworthiness of the customer by analyzing possible sources and time limit for loan repayment, compliance of a particular loan purpose with loan repayment sources;
5. Credit history of the customer and procedure for fulfillment of provisions under the loan agreement;
6. Loyalty of the customer to the Bank in using Banks services for daily payments, history of customers current accounts with the Bank;
7. type of pledged collateral, its actual value, existence of solvent guarantors;
8. country risk if a loan is issued to a non-resident or its activities are performed outside Latvia;
9. other risks related to these customers of the Banka.

To take a decision on extension of a loan repayment period, the Bank applies an individual approach to each customer of the Bank.

Setting of loan interest rates

Interest rates for use of loan funds are set for customers and their associated projects individually, and the Bank determines loan interest rates after assessing the price of available to the Bank cash resources, costs necessary for loan maintenance, possible creditworthiness risks.

In determining the interest rate for a particular loan the Bank considers the following:
funds acquisition costs;
credit history of the customer;
loan maintenance costs;
loan duration and repayment schedule;
cover for possible loss of a loan transaction;
credit risk degree;
loan repayment means;
type and quality of loan collateral;
money market situation;
possible exchange rate fluctuations;
inflation rate;
interest rates in the lending market;
gains of the Bank from a particular transaction;
other factors.

For using of loan funds the Bank may set both a fixed interest rate or a floating interest rate, and a relatively fixed interest rate with certain additional conditions, which, if realized, change a fixed interest rate to a floating interest rate and vice versa - a floating interest rate to a fixed interest rate.

The Bank applies fixed (constant) interest rates mainly to short-term loans (credit lines, overdrafts, etc.), but floating interest rates – to long-term loans. A floating rate consists of a variable interest rate component which depending on the chosen currency is 3 or 6 month RIGIBOR, EURIBOR or LIBOR, and a fixed interest rate, which is set by Loan Committee/Board of the Bank having assessed the potential risks of the loan to be granted. 

Solutions for unsatisfied customers

In working with its customers the Bank complies with the “Principles and Guidelines for out of court consumer mortgage workouts” approved by the Council of the Financial and Capital Market Commission, and the Republic of Latvia “Consumer Rights Protection Law”.

If a customer is not satisfied with a Banks decision on lending, the customer has to necessarily require written information about the decision of the Banks Loan Committee / Board, including full text of the decision on lending conditions or refusal to grant a loan.

If a customer is not satisfied with a decision of a Banks Committee or manager, the customer has to submit a written complaint to the Bank, specifying:

information about the submitter (for natural persons: name, surname, identity number, if any, or passport data, for legal persons: name and registration number, position of the representative, name, surname, telephone number, submitters address);

substance of the complaint;

document that substantiates the complaint.

The procedure for acceptance and consideration of written complaints filed by customers in the Bank is defined in the General Transactions and Accounts Service Regulations.

The Bank will consider a customers written complaint and respond to it within 30 (thirty) days after its receipt. If consideration of a complaint requires a longer period, the Bank will notify the customer of approximate time for giving a reply.

If a customer is not satisfied with the Banks response to his/her complaint, the customer has the right to lodge a complaint to the Ombudsman of the Association of Latvian Commercial Banks.