Banks, Financial Services, Latvia, Legislation, Loan, Real Estate

According to the amendments, a credit institution will be entitled to unilaterally write off, partly or in full, such loan obligations of private individuals, which have not been fulfilled due to the economic downturn in 2008, if the loan agreement was concluded between the credit institution and the private individual, the individual is not and has not been associated with the credit institution, and if the individual's obligations are based on a loan agreement that entered into force before December 31, 2008.

The amendments stipulate that a loan can be written off if a real estate property was used as security to take out the loan, and if the debtor was no longer the owner of the property as of December 31, 2018. The debtor must not be subject to insolvency proceedings.

Before the economic crisis of 2008, lending volumes in Latvia were increasing very fast, but a sharp decrease in residents' incomes followed that made it difficult for borrowers to honor their obligations. These debts are in, in essence, irrecoverable and therefore should be written off, the Bank of Latvia Governor Martins Kazaks said earlier this year.

According to the Bank of Latvia and Finance Latvia's data, there are about 13,000 debtors in Latvia who were affected by the 2008 economic crisis, and their total debts are estimated at up to EUR 600 million.