25.9.2015   

EN

Official Journal of the European Union

L 250/1

(1)

On 19 November 2009, the Commission approved two recapitalisation measures in favour of ‘The Mortgage and Land Bank of Latvia’ (2) (‘MLB’ or ‘the bank’) for a total amount of LVL 72,79 million (EUR [102,5-103,6] million), which were granted to the bank in January and November 2009 (3) respectively (‘the November 2009 decision’).

(2)

On 1 April 2010, the Latvian authorities notified a further recapitalisation in the amount of LVL 70,2 million (EUR 100 million), which had been implemented on 23 March 2010. The notification was registered on 6 April 2010. The Latvian authorities provided the Commission with further information between May 2010 and January 2012 (4).

(3)

On 26 January 2012, the Commission decided (5) to temporarily approve the recapitalisation measure of LVL 70,2 million granted on 23 March 2010, a recapitalisation measure of LVL 50 million granted to the bank at the end of 2011 (granted as a liquidity measure to be converted into capital), a standby liquidity facility of up to LVL 250 million for the bank, guarantees to international creditors of the commercial segment of MLB of up to LVL 32 million and liquidity support of up to LVL 60 million for the solvent liquidation of the bad assets within HipoNIA, an asset management company owned and financed by MLB, and to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘the Treaty’) in respect of those measures in so far as they were needed for the restructuring of the commercial segment of MLB (‘restructuring measures’) and benefitted its development segment and in respect of the transformation plan of MLB (6) (‘the opening decision’).The Commission had doubts as to the compatibility of the restructuring measures with the internal market in the light of the Commission's Communication on the return to viability and the assessment of restructuring measures in the financial sector in the current financial crisis under the State aid rules (7) (‘the Restructuring Communication’).

(4)

The Commission invited interested parties to submit their comments on the restructuring measures. The Commission did not receive any comments from interested parties.

(5)

On 22 March 2012, a meeting between the Latvian authorities and the Commission took place.

(6)

On 5 April 2012, Latvia submitted its comments on the opening decision.

(7)

Between May 2012 and June 2013, Latvia and the Commission exchanged information regularly. Latvia kept the Commission informed of the progress made with regard to a privatisation process for the commercial part of the bank by way of several submissions of information.

(8)

On 23 May 2013, the Commission requested additional information. By letter dated 3 June 2013, Latvia replied to the request for information, except for the questions on the development segment of the bank. At the same time, Latvia provided various supporting documents, including an update on the sale of MLB's commercial part.

(9)

On 21 June 2013, the Latvian authorities informed the Commission that they exceptionally accept that this Decision be adopted in the English language.

(10)

On 28 June 2013, Latvia informed the Commission that it had in fact lent HipoNIA LVL 70,98 million, and had thereby exceeded the amount of the measure temporarily authorised in the opening decision by approximately LVL 11 million.

(11)

On 19 March 1993, MLB was established by the Latvian government as a State-owned bank. The Ministry of Finance of the Republic of Latvia is the holder of 100 % of the bank's shares.

(12)

MLB is a medium-sized bank in Latvia offering retail bank services. MLB has a dual role, meaning that it operates both as a development bank and a universal commercial bank (8).

(13)

MLB and its subsidiaries make up the MLB group. All of the bank's subsidiaries are involved in activities of commercial nature. The main ones are as follows:

(14)

In line with the transformation plan described in recitals 45 to 95 of the opening decision, MLB is being transformed into a full development bank (i.e. a bank supporting structural, economic and social policies on behalf of the State, in accordance with its public mission). To that end, it is being stripped of its commercial activities.

(15)

Latvia appointed an independent external advisor to prepare a concept for development institutions in Latvia. On 11 February 2011, the first draft ‘Report on Optimization of the System of Development Financial Institutions in Latvia’ was submitted to the Commission and the International Monetary Fund (IMF).

(16)

The draft report recommends, amongst other matters, the creation of a single development institution (‘SDI’) while recognizing the need to ensure its independence by establishing it by a special law and by creating independent decision-making bodies. In that context, the draft report identifies the need to design the functional structure of the SDI from scratch, based on a full review of existing programmes and their functional and staffing needs, in particular in respect of risk assessment and management functions.

(17)

Furthermore, it emphasises the need for State interventions through indirect instruments (individual and portfolio guarantees, venture capital, mezzanine funds etc.), while moving away from large direct lending and leaving direct interventions only as an option for a few very specific and justified cases (micro-lending, farmers, etc.).

(18)

According to the draft report, indirect channelling of State-supported lending would increase access to the potential beneficiaries of such programmes and improve both distribution cost-efficiency and cooperation with the commercial banking sector.

(19)

In line with the July 2010 Supplemental Memorandum of Understanding (‘sMoU’), an independent advisor was to draw up the MLB transformation plan. That advisor was instructed to prepare scenarios on transforming the bank in order to allow either for assets and liabilities related to development financing to be split off and for the bank with its commercial activities to be privatised or for the bank to be transformed so that commercial activities could be sold leaving the development segment behind.

(20)

After having analysed the financial situation of the bank, the independent advisor concluded in transformation plan produced in April 2011 (‘the April 2011 transformation plan’) that the best scenario would be to sell MLB's commercial assets in bundles in a timely manner.

(21)

On 1 November 2011, the Latvian government endorsed the sale strategy recommended in the April 2011 transformation plan, and specifically the sale of MLB's commercial segment in six bundles.

(22)

The entities belonging to the MLB group which were to be sold by means of a share deal as legal entities are shown in Chart 1.

Chart 1

Overview of legal entities belonging to MLB group  (11)