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Latvian private sector gets EBRD credit line
A US$ 20 million (ECU 15.4 million) loan from the European Bank for Reconstruction and Development (EBRD) will allow Latvia’s largest bank to increase its medium-term lending to small and medium-sized private enterprises. The two-tranche credit line to Latvijas Unibanka (Unibanka), a joint-stock company incorporated under Latvian law, will also diversify the sources of its financing. The agreement was signed in Riga today.
David Hexter, Deputy Vice President of the EBRD, said: “Our first loan to Unibanka will not only improve its operations and role as Latvia's leading bank, but also rebuild confidence in the banking system by encouraging international banks to establish lending exposure limits to Unibanka and, eventually, other reputable Latvian banks. This loan will stimulate Latvia's economic development by attracting additional funds for medium and long-term investment financing”.
The two-tranche credit line of US$ 15 million and US$ 5 million will facilitate better servicing by Unibanka of its clients’ loan requirements. It will finance medium-term projects of up to US$ 1.5 million, of which more than 20 are already under preparation at Unibanka. Plastic packaging, cartonboard, paper and meat industries, all figure prominently in the pipeline and have a 5-6 year maturity.
The project offers substantial benefits: it will provide medium-term funds in a market where almost all credit is short-term, and it will support the privatisation of Latvia's largest and most important bank while strengthening its operations. Moreover, it will demonstrate confidence in the Latvian banking system and increase competition among the country’s healthier banks.
Founded in September 1993, Unibanka was formed from 21 branches of the Bank of Latvia, the successor to the former Soviet Gosbank. It is the leading universal bank in Latvia, with a strong retail and corporate deposit base and clients from almost all sectors of industry and commerce. As of 1 October 1995, Unibanka represents over 15 per cent of all Latvia's banking assets and has more than 1,000 employees. While extremely cautious in its lending policy, the bank has managed to increase its loan portfolio significantly in 1995. The bank's head office is in Riga, with its 27 branches located in each major industrial and population centre in the country.
The EBRD has already extended credit lines to Zemes Bank and Deutsch-Lettische Bank in Latvia, and owns shares in the Investment Bank of Latvia. The EBRD will continue to play an important role in the Latvian banking market where its success record can be attributed to a careful and selective approach which entails thorough due diligence and close monitoring.
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