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Highlights

Baltic International Bank’s Opening Hours on 18 November 2019

Please note the Bank’s working hours have been changed in connection with the national public holiday, the Proclamation Day of the Republic of Latvia on 18 November 2019. On 18.11.2019 (Monday) Baltic International Bank will be closed. Please pay due attention to the above mentioned changes and plan your financial transactions in a timely manner.

Baltic International Bank supports Stockholm School of Economics in Riga

Baltic International Bank initiates and actively supports projects that promote family values, literature, spirituality, healthy living and responsibility for the socially vulnerable. We are pleased to have the opportunity to support and motivate students from Stockholm School of Economics in Riga (SSE Riga). Education is the best investment for the future and the safest way to bring positive changes. We are the investment Bank focusing on sustainable investments with high added value and positive contribution to the future of society. Which investment is better than investment in the emerging professionals? Supporting education of talented students, we are creating valuable heritage we will leave to our children and grandchildren. Reliability and Succession is the focus of our Bank. Our Reliability is our expertise, new, innovative projects, for example, in wind energy, energy efficiency, professionalism, knowledge and knowhow. Succession means transfer of values to the future generations. Values matter only if we can pass them forward. Use to support young talents. Baltic International Bank has already attracted several powerful and talented professionals amidst the alumni of SSE Riga. We want to stand by the future leaders in their educational and professional journey.Viktors Bolbats

A collection of memoirs “My 20th Century” by Marina Kosteņecka has been published

This week, the Support Foundation of the National Library of Latvia (NLL) published a collection of memoirs of a columnist, writer and journalist Marina Kosteņecka which can be purchased in the Friends Room of the NLL. The books were published with the support of Baltic International Bank. Marina Kosteņecka tells about her collection of memoirs: "These books are a portrait of Latvia reflecting the bright soul of people and their ability to unite regardless of nationality. This is a confirmation of my love for Latvia and gratitude to people. I give back to my community..." Valeri Belokon, the main shareholder of Baltic International Bank, patron of Latvian literature: "These books are a fantastically valuable story about the latest history of Latvia based on personal experience, and their publication is an event in the Latvian book publishing industry. Four books in two languages will go to public libraries and be available to everyone." I am thankful to Marina Kosteņecka for her great contribution into the building and uniting of the Latvian society Valeri Belokon   In her speech at the event in honour of the publication of the books, the Head of Strategic Planning Department of Baltic International Bank Jekaterina Kuzņecova said: "Madam Kosteņecka, Latvia needs you. Your public standing, your ability to understand the mentality of people speaking different languages, diverse experience, your ability to speak the same language with both Latvians and Latvian Russians – all this is important for the unity of society, for creating common values, a sense of belonging to society. People want to see and hear you. You have things to tell them. They need you. Thank you so much and may you have the strength to keep going!" Jekaterina Kuzņecova, head of Strategic Planning Department, Baltic International Bank Minister of Culture of the Republic of Latvia Nauris Puntulis Having published the extensive collection of memoirs, the Director of the Support Foundation of the NLL Karina Petersone emphasises: "We are very glad to have been the publishers of Marina Kosteņecka's books in Latvian and Russian. In our opinion, something very valuable and beautiful has been created. These books not only play a role in Marina’s own work, they add colour and taste to an era that many generations call their own. We are pleased to see Marina return to the public space because her presence and opinion are very important for society." The collection consists of two books – "My 20th Century" and "Letters from the 20th Century" – in Latvian and Russian. The author calls it the work of her whole life, and in the books she shares her life story, memories of the most important events in the modern history of Latvia and unique evidence of the era – letters received from readers and supporters during the National Awakening (Atmoda). The co-author of the book "My 20th Century" is Georgs Stražnovs; the foreword to the book was written by Dainis Īvāns and Knuts Skujenieks.  Photo gallery of the event held in honour of the publication of the collection of memoirs "My 20th Century" by Marina Kosteņecka.

Baltic International Bank presents an ESG Report at the Non-financial Reporting Seminar organised by the Institute for Corporate Sustainability and Responsibility

At the end of September, the Institute for Corporate Sustainability and Responsibility (InCSR) hosted an experience exchange seminar and a discussion on non-financial reporting for Latvia’s largest and most responsible companies during which Baltic International Bank presented its ESG (Environmental. Social. Governance) Report. Viktors Bolbats, chairman of the Bank’s Management Board, shared his experience in implementing the sustainability strategy and presented the Bank's future goals. Good practice examples were also shared by the Institute for Corporate Sustainability and Responsibility, JSC Latvenergo, Coca-Cola HBC Latvia LLC, as well as the representative of Sustinere, a non-financial reporting expert from Estonia – Marko Siller. At the time of presenting the Bank's first non-financial or the ESG Report, Viktors Bolbats, chairman of the Management Board of Baltic International Bank, emphasized the importance of sustainability: “Nowadays, sustainability is no longer an option but a necessity. In my opinion, ESG (or sustainability) means doing things today that we can be proud of tomorrow and further on. The ESG approach is appropriate for us since it covers all three areas that the Bank already perceives as the pillars of its development. ESG has both environmental and social considerations as the Bank is not only a financial institution, a credit institution, but also a consumer of energy and other resources, a taxpayer, an employer. The ESG (Environmental. Social. Governance) approach pervades all of the Bank's core business areas; our ESG goals are not declarative, but implemented in all day-to-day processes.” We have to understand that in this age, not only we expect openness and transparency from our customers and partners – they also expect it from the Bank. The Bank is part of an ecosystem that must work responsibly with this system. Banks carry a heavy burden of social responsibility. They also have the opportunity to support and engage in responsible investment transactions that benefit the national economy as a whole. With this in mind, we have set the Bank's strategic goal for the year 2030 to specialize in profitable, environmentally friendly and sustainable investments,   adds Bolbats noting that the ESG approach is also a change in habits and mindset where leadership support, clear objectives are essential and indicators, employee engagement and effective internal communication are measurable. “More and more companies, both in the world and in Latvia, are not only accountable for their financial performance, but also for their impact on the employees, environment and society. This is, of course, influenced by global developments, international regulation and the demand from civil society for greater openness and mitigation of the negative impact of business. In addition, entrepreneurs are beginning to realise that non-financial reporting helps improve risk management and long-term environmental and management performance thus contributing to competitiveness,” explains Dace Helmane, CEO of InCSR. After the attendees were interviewed on key criteria for a meaningful non-financial report, it was concluded that a meaningful non-financial report should be based on a completely fair approach (nearly one-third or 27.3% of the participants stressed it) while data was ranked second (19.5%). Among the topics covered in non-financial reporting, readers are most interested in corporate governance and business ethics (28.4%) followed by data privacy and protection issues (17.3%), and customer and consumer satisfaction aspects (14.8%). Marko Siller, a non-financial reporting expert from Estonia, said: “All major companies need to look for the most effective ways to showcase their progress and influence. If a company does not do so, it no longer speaks the same language with the rest of the business community – customers, suppliers, investors. Today, beautiful, self-praising words must be proven with data, measurable goals, and real results.” Guntars Mikhailovs, international relations specialist at JSC Latvenergo, explained to the audience the involvement of stakeholders and their great role in meaningful reporting: “Stakeholder engagement is an essential part of good governance and sustainability for any organisation. It provides insight into issues of mutual interest, improves employee motivation, increases stakeholder confidence and, as a result, contributes to the organisation's value. The Latvenergo Group regularly reviews the views of stakeholders on past cooperation and aspects that are important to the Group's sustainability as well as discusses proposals to improve the Group's performance. The design of the sustainability report and the format in which stakeholders receive relevant information about the company are also important.” Dace Dricka, public relations manager at Coca-Cola HBC Latvia LLC, said she was very proud of Coca-Cola HBC Latvia's achievements in the field of sustainability, and also wanted to remind the attendees that sustainable performance never stops, so businesses must focus both on achieving their long-term sustainability goals and communicating properly to the public and stakeholders since only such an approach will be viable in today's corporate socially responsible environment. The event was attended by more than 30 different companies and organisations from different sectors – finance, mobile, energy, logistics, manufacturing, etc. Institute for Corporate Sustainability and Responsibility The Institute for Corporate Sustainability and Responsibility (InCSR) was established in early 2011 with the aim of strengthening the sustainable development of the state and local community by educating the public and raising awareness of responsible and forward-looking behaviour and promoting the development of civil society. InCSR provides reliable measurements, supports and promotes civil society activities, organises and participates in various projects, seminars and campaigns on proactive and safe behaviour, and provides a platform for the exchange of experience and opinions.

Baltic International Bank sets the Sustainable Development Goals in line with the United Nations Environment Programme Finance Initiative

Developing the Bank's strategy and moving towards the overall goal of becoming a strong and sustainable investment Bank based on the internationally acclaimed ESG (Environmental. Social. Governance) approach, Baltic International Bank has set the Sustainable Development Goals under the United Nations Environment Programme Finance Initiative (UNEP FI) and is committed to achieving these goals in the Bank's operations and processes. By 2030, the United Nations (UN) has approved a total of 17 Sustainable Development Goals. In its activity, the Bank will focus on seven of them. Responsible banking principles of the UNEP Financial Initiative The UNEP FI sets out six principles for responsible banking. The first is alignment which requires the Bank to align its business strategy to be consistent with and contribute to individuals’ needs and society’s goals in accordance with the Sustainable Development Goals (SDGs), the Paris Climate Agreement, and relevant national and regional frameworks. The second principle of responsible banking is about impact constantly increasing the positive impact and reducing the negative impact on society and the environment. The third principle of responsible banking is our customers as the Bank commits itself to working responsibly with its customers and counterparties to encourage them to adopt sustainable practices and enable economic activities that create shared prosperity for current and future generations. The other three goals are related to stakeholders and define responsible cooperation with stakeholders and their involvement in the achievement of society’s goals; governance and goal setting through a responsible culture and efficient management of the Bank; and finally, the sixth goal is about transparency and accountability with the Bank committing itself to being transparent about and accountable for its influence and contribution to all processes and achievement of society’s goals. “The banking sector has an important role to play in promoting sustainable development. It can set an example for others directing society towards a sustainable economy, for instance, by encouraging investment in environmentally friendly and sustainable projects. Baltic International Bank bases its day-to-day processes and activities on the ESG (Environmental. Social. Governance) approach which encompasses all areas of the Bank's activity allowing it to succeed in a sustainable and socially responsible manner; so, our desire to set and implement the Sustainable Development Goals under the UNEP FI which is a comprehensive initiative that operates at both micro and macro level, covering a wide range of areas from employee concerns to responsible consumption, climate protection, poverty and inequality at all levels, is only natural”, emphasized Viktors Bolbats, chairperson of the Management Board of Baltic International Bank. The UN Sustainable Development Goals, which Baltic International Bank will implement in its activity, are organically embedded in sustainability activities excellently complementing and enriching them as we are proud to be the first local equity bank in Latvia to receive the highest Platinum Award of the Sustainability Index in our country this year.Viktors Bolbats    “Each of the Sustainable Development Goals is also relevant for Latvia, and our country is committed to promoting them through prosperity, inclusive society and sustainability. It is clear that this can only be done jointly, and business involvement plays a crucial role. Baltic International Bank is one of the first domestic companies to choose, from a wide range of Sustainable Development Goals, the goals that are most relevant to it and commit itself to meeting them by tailoring them to its own interests, needs and possibilities. We expect the interest of local businesses to grow significantly in the near future, and, as new companies become aware of their wider economic, social and environmental impact, they will align their sustainability plans with global goals,” said Dace Helmane, director of the Institute for Corporate Sustainability and Responsibility.   Bank's 7 Sustainable Development Goals Since its foundation, it has been important for the Bank to maintain a healthy lifestyle and promote well-being at all ages which is why “Good Health and Well-Being” is the first Sustainable Development Goal that the Bank focuses on in its activity. The Bank cares for its employees by creating a supportive culture for children and families in the work environment, and, as a responsible employer, ensures motivating working conditions, balancing work and leisure time, and organising special events for the families and children of its employees. Caring for society, the Bank organises the Blood Donor Day and provides diverse support to cultural and literary projects, for instance, by sponsoring the publication of the unique book "Family Coats of Arms in Contemporary Latvia”. In line with the Sustainable Development Goal providing for "Poverty Eradication" in all its forms and at all levels, the Bank engages in a variety of community activities – renders annual support to the boarding schools where, within the framework of charities, the Bank’s employees jointly provide footwear, clothing, games and sports equipment and other things useful for children, donate computer equipment to Latvian schools, participate in various donation collection initiatives to support children and families in need. Baltic International Bank renders socially significant support to the Holy Family House, a multifunctional family support centre that enables families with children, adults, seniors, and people with disabilities to receive spiritual, social, psychological and educational support, and integrates Christian values into society, as well as to the day childcare centre “Teresa's Home” which provides social services for disabled children living in Riga. The Bank is committed to providing affordable, reliable, sustainable and modern energy to all in line with the Sustainable Development Goal "Affordable and Clean Energy" whereby the Bank offers and supports alternative investment ESG projects, such as the current wind energy investment project. In line with the Sustainable Development Goal "Decent Work and Economic Growth", the Bank promotes stable and sustainable economic growth, full employment and good work for all by caring for its employees and paying its taxes and salaries responsibly. This is also evidenced by the "Family Friendly" award given to the Bank for the third year in a row by the Ministry of Welfare of the Republic of Latvia, one of the criteria of which is taking care of the needs and comfort of the employees. Innovations, which also lie at the heart of the Sustainable Development Objective "Industry, Innovation and Infrastructure", run throughout all of the Baltic International Bank’s operational processes. In addition to supporting start-ups, especially in financial technology, and implementing innovative solutions such as Open Banking or open banking platform for cooperation Sandbox, the Bank is also working on improving its infrastructure through an ambitious, large-scale project in the Kalēju Quarter where the Bank performs renovation of the oldest building in Riga with a total investment of approximately EUR 12 million. In line with the Sustainable Development Goal "Responsible Consumption and Production", the Bank promotes sustainable consumption and resource use. For instance, in 2018 the Bank reduced its water consumption by 9.9% compared to 2017; the Bank also sorts waste of which almost half (42%) is recycled. Since 2016, the Bank has started monitoring electricity consumption, and set itself the target of reducing it by 5% in 2017. Lighting has been optimised, and some of the bulbs were replaced by LED bulbs. The Bank also purchases electricity from renewable sources. Heat consumption is also reduced because of the careful adjustment of the equipment to the needs of the employees, as well as eliminating unnecessary consumption. There is also regular environmental education for employees. Energy consumption has a major impact on CO2 emissions and their impact on the climate. The Bank reduced its CO2 emissions by 5% (in 2018 compared to 2017) in line with the UN Sustainable Development Goal "Caring for the Climate" under which the Bank also supports sustainable projects with a lasting public contribution.   About the United Nations Environmental Programme Financial Initiative (UNEP FI) The United Nations Environment Program is a leading international environmental body that sets the agenda for environmental issues worldwide, promotes the implementation of coherent environmental and sustainability processes within the United Nations system, and acts as an authoritative advocate for environmental issues at the international level. The UNEP FI is an international partnership between the UNEP and the financial sector. More than 200 institutions, including banks, insurers and investors, are working with UNEP FI to bring about systemic financial change in support of a sustainable world. UNEP FI brings together leading international banks, regional leaders, development banks and specialised environmental banks. 

Baltic International Bank Supports the Opening of Day Childcare Centre St. Theresa’s Home

On 23 August 2019, a service of consecration was held to sanctify St. Theresa’s Home, the day childcare centre in Riga. A charitable foundation Caritas Latvija implemented the project by channelling ESF money into the project and with support from Baltic International Bank. During sanctification of the centre, His Excellency Metropolitan Archbishop of the Roman Catholic Archdiocese of Riga Zbignev Stankevich (Zbigņevs Stankevičs) said the following heartfelt words: "The creation of the daycentre for children having specific needs is important not only for the Church but also for the entire community. To propagate works of mercy is the Church’s second most important mission. The Church’s foremost mission is to glorify God by proclaiming the gospel. The centre will foster social rehabilitation and integration of children with special needs and will provide support to their parents. It is of paramount importance that every single child visiting the centre experiences joy and happiness." “We feel overwhelmingly pleased that our long-standing partnership with the Roman Catholic Archdiocese of Riga and, from now, also with Caritas Latvija proves to be beneficial to the community. Through our joint efforts, we make people, and children in particular, feel happier", the main shareholder of Baltic International Bank and patron Valeri Belokon emphasises. “The very substantial amount of work has been done and so much love has been contributed to create the centre. Now, St. Theresa’s Home is ready to give joy and a warm welcome to everyone who needs it”, the Head of Bank’s Strategic Planning Department Jekaterina Kuzņecova said. “For the childcare centre, Bank provided financial assistance and helped make the territory more attractive by planting thuja trees. Stemming from the classical Latin word “thya”, thuja means arborvitae or tree of life. As Bank is committed to sustainable thinking about future generations and to sustainable living, it is of the utmost importance to practice the ESG principle in everyday life. We were just happy to make the landscape more vibrant and welcoming“, J.Kuzņecova added. We are a bank that is truly attentive to the needs of our fellow citizens and that takes a lead on strengthening family values. The support therefore appears quite logical. As succession is one of its core values, Bank consistently promotes intergenerational bonds, principles of family unity and family well-being. Valeri Belokon   The director and  psychologist of the centre Ilze Reinfelde was very satisfied that the project team comprised knowledgeable and seasoned professionals, such as social workers, a speech-language therapist, music therapists, art therapists, an ergotherapist (occupational therapist), physiotherapist, social teacher, carers and pastoral counsellor (pastoral care consultant). St. Theresa’s Home provides social services for children with disabilities who live in Riga. Overall, the project aims to provide services to 50 children and the members of their families. Predominantly pupils of special needs schools are eligible for the benefits delivered by the project. The children can also access different specialists. However, the parents say that the benefits are still insufficient. That is why they eagerly seize the opportunity offered to their children to attend additional activities arranged and scheduled by the available specialists.    

Baltic International Bank closed the first half of 2019 with profit, successfully completing the transition to the new business model

In the first half-year of 2019, Baltic International Bank significantly improved its performance results in comparison with the first half-year of 2018. The Bank closed the first half-year of this year with a positive result – a profit of EUR 295 thousand. Continuing to implement the new model, the Bank increased operating income and reduced operating expenses in comparison with the first half-year of 2018. Due to support of the Bank's shareholders and work of the Bank's Management Board and team, the Bank's capital adequacy ratio was significantly improved to 14.16% (12.9% as of 31.12.2018), meeting the requirements of the Financial and Capital Market Commission and maintaining a high liquidity ratio of 212%. Assets under management, including securities, portfolios, co-financing are at historically highest levels showing growth of 33%. “Financial results of the first half-year (receiving profit) are an important milestone for the Bank, demonstrating that its business strategy is beginning to prove its viability. Following the trend of previous months, we are confident that we will strengthen and improve this result further in the next quarters. To continue the successful transition to the new business model, the Bank continues development of a privately-owned bank strategy focusing on providing investment services and asset management services to customers, developing new services and products with high added value, implementing changes in the Bank's positioning and customer demand. The Bank transforms its income structure and strengthens internal control systems by giving priority to servicing customers from Latvia, Baltic States and European Economic Area (EEA),” says Viktor Bolbat, Chairman of the Management Board of Baltic International Bank. As of 30 June 2019, the total customer assets reached to EUR 527 million (Annex 1), assets under management totalled EUR 96.84 million (EUR 96.84 million), demonstrating growth by 30% year-on-year. The value of financial instruments in brokerage service was EUR 168 million (EUR 168 million).   Operating income for the first half of 2019 increased by 24% (26%) compared to the same period of the last year and amounted to EUR 6.92 million (EUR 7.08 million). Net commission income increased to 60.6% (59.2%). The specific weight of net interest income was 20.8% (20.3%). Administrative expenses amounted to EUR 5.62 million (EUR 5.68 million) and were reduced for 27.9% (27.1%) in comparison with the previous year. As of 30 June 2019, the Bank's own funds totalled EUR 24.27 million (EUR 24.34 million). The Bank’s Tier I capital ratio (CETI) was 10.03% (10.11%). The Total Capital Ratio reached 14.16% (14.26%). In the first half-year, the Bank continued to work on new digital tools and channels – development of an improved version of the Internet Banking, started offering the Open Banking API Sandbox solution to launch the Open Banking solution in September, and launched an Investment Opportunities platform, on which existing and potential customers can choose their investment portfolio using an interactive calculator. On its way to becoming a strong investment bank, Baltic International Bank organized a high-level Investment Forum for its customers, business partners and key stakeholders in the first half of the year. The Investment Forum was one of the important events in the region for investment banks. The purpose of the forum is to provide a platform for discussing and sharing world-class experience and the latest investment management strategies and creating future business prospects for the Bank's customers, as well as fostering international investor interest in the Baltic market. In March 2019, Sigma Ratings, a New York-based rating agency, assigned BBB+ financial crime compliance (FCC) rating to Baltic International Bank placing it among industry leaders. Viktor Bolbat, Chairman of the Management Board of Baltic International Bank, explains: "This is a high appreciation of the Bank's work, as Sigma's report covers both the financial crime prevention processes already implemented by the Bank, also in the field of prevention of money laundering and terrorism financing, and gives a positive assessment of the Bank's future development.” Owing to the business model of Baltic International Bank and its high corporate governance and sustainable business principles as well as its social initiatives, in 2019, Baltic International Bank has significantly improved its performance in the Sustainability Index to the highest Platinum category, and the Bank was awarded Family Friendly Company Status by the Ministry of Welfare for the third year in a row. In the first half of this year, supporting Latvian literature the Bank continued implementation of the reading promotion project ‘Library’. The project aims to educate the public regarding the importance of literature in people’s lives and to tell people about private libraries and collections held in private libraries. The project will introduce Latvian dynasties and treasures of their libraries as well as something special – their coats of arms. Key financial indicators:   The financial report of Baltic International Bank for the 1st half-year is available here.

Bond issuance as a first step towards quoted state-owned joint stock companies - Viktors Bolbats

The need to support the increase of competitiveness, development and rapid growth of the Latvian national economy utilising the capital market potential and stock exchange that have been underused so far is becoming increasingly clear. The experience of Latvia's closest neighbours shows that listing state-owned companies is a way for the state to achieve rapid growth in the company value without losing control of the company – both by attracting additional funding for development and by motivating the company to work to the best standards of corporate governance. In addition, the intensification of the national capital market favours foreign direct investment and increases in the amount of taxes paid since the funding raised allows companies to develop faster.   Energy sector and port In Lithuania, the shares of five state-owned energy companies are successfully listed on the stock exchange with the state retaining a controlling interest or ensuring control over important decisions. The Estonian government, in turn, has taken the first serious steps to make more effective the use of its capital invested in companies and to increase its value – in June 2018, the Port of Tallinn (Tallinna Sadam), an Estonian port management company, was successfully quoted on the Tallinn Stock Exchange which is considered to be an absolute success story in Estonia since it raised EUR 150 million for development. 14 thousand Estonian individuals became shareholders in said company five thousand of whom opened a securities account for the first time, i.e. started saving up for their future through the stock market for the first time. Where we are and where we should be At present, Latvia has the lowest market capitalisation in the Baltics far behind its neighbours. The Latvian capital market is currently characterised by a small number of listed companies (23 in total); stock market capitalisation in Latvia is only EUR 0.8 billion. New members come in slowly, too; for instance, in 2016, the stock exchange was entered by JSC HansaMatrix, the first new company to enter the stock exchange after a 12-year break, and in 2017 it was followed by JSC MADARA COSMETICS. Mention should also be made of the low liquidity, i.e. the low volume of free flow shares. In spite of record private savings, the activity of private investors is relatively low since other types of investments and savings that are not conducive to the development of the capital market are more popular in Latvia. In order to stimulate capital market development, large companies with a market value of several hundred million euro need to be listed on the stock exchange as such companies attract the initial interest of foreign investors and activate local investors. For instance, state-owned companies, including JSC Latvenergo, JSC Latvia’s State Forests, and JSC Latvian Railway, hold the highest positions in the top companies of Latvia's most valuable companies. Shares or bonds Shares or IPOs (initial public offers) and bonds can be used to raise new capital and inject financial resources into a company. By acquiring shares, new investors invest in capital and become co-owners of the company; whereas, when buying bonds, investors lend money to a state company without gaining ownership. In the current low interest rate environment, investor demand for government-owned corporate bonds is high. This is evidenced by the successful bond issues of JSC Latvenergo and JSC Altum where demand significantly exceeded supply. It should be noted that share quotation is a relatively complex and time consuming process: it is necessary to restructure the company into a joint-stock company, implement international financial statements, and prepare a public offer prospectus. Bond issuance is relatively simpler and quicker but brings benefits in terms of corporate transparency, governance, disclosure, and capital market development. Through bonds, the state retains control while sharing business risk with the private sector. Bond issuance is an optimal first step towards quoting state-owned company shares. Latvia’s successful examples in the bond market Latvia can also boast successful examples of raising new capital for state-owned companies. Here we can mention the green bonds traded by JSC Latvenergo where the record high interest of investors and the fixed low end yield of bonds was proof of successful performance as well as of the investors’ interest in investing in green projects as asset management funds, insurance companies and banks showed interest in bonds not only in Latvia, Lithuania, Estonia, but also in France, Austria and Finland. In total, green bonds worth EUR 100 million were issued attracting 25 different investors. Also, the success story of JSC Altum which attracted EUR 45 million on the Nasdaq Baltic bond market is to be highlighted. In May this year, the company issued another EUR 15 million worth bonds where the amount recorded was 13 times the amount issued. Over the next three years, the company plans to raise up to EUR 55 million in additional emissions. The Latvian airline airBaltic has also recently issued five-year bonds worth EUR 200 million which is one of the largest issues ever in Latvian business attracting more than a hundred investors from 25 countries. Although the main airBaltic’s shareholder is the Latvian state, it is interesting that the bonds will be quoted exclusively on the Euronext Dublin Stock Exchange without listing on the Nasdaq Baltic which would facilitate the development of the local capital market and allow increasing market capitalisation. Latvian people intend to participate Very important positive news is the intention of Latvian people to get involved and participate in capital market development in our country. According to a survey conducted by the research centre SKDS in December 2017, 67% of people surveyed support quoting of the shares of large Latvian state-owned companies on the stock exchange so that they can be freely purchased by all citizens. 49% of the population would like to invest their free cash in the shares of well-managed Latvian state-owned companies on the stock exchange.   By making state-owned companies public and quoting on the stock exchange, or by issuing corporate bonds, any resident of Latvia has the opportunity to become an investor in these companies. This allows receiving regular and important information about the company's operations and, in the case of shares, to participate in the taking of decisions important for the company. It would also build and develop an active civil society and foster dialogue between large, prominent state-owned companies and society. The FCMC’s data shows that 9 billion euro in Latvia are invested in household deposits, and some of these funds could certainly be invested so that people could raise  capital, increase their well-being and look into the future more safely. A well-developed capital market is one of the cornerstones of national economic growth. As in other areas, the best practice principle applies here, namely, state-owned joint-stock companies planning to take the first steps in raising capital on the capital market through bond issues should follow the experience of JSC Latvenergo and finance institution Altum in adapting what they have achieved and adjusting it to own sector. In addition, the company will be a winner in any case since capital market operations streamline the company's processes making it more transparent, more efficient in management and more attractive to investors. While the economic benefit of public listing of state companies is obvious, it is essentially a political decision in the first place. Therefore, the government's decisions over the next few years will show whether Latvian state-owned companies will be able to take advantage of the free capital market, ensure that growth of the value of state companies and, at the same time, long-term economic development in Latvia.  Opinion article for portal DELFI.lv, 11.08.2019

Classic Banks and Fintech – Competitors or Allies - Viktors Bolbats

Fintech companies, i.e. startups working in the field of financial services, are currently gaining popularity. There are various assumptions that over time Fintech companies will be able to compete with classic banks as they are available to a wider range of people, able to adapt more quickly to market fluctuations and vary the offer. There are also questions about how banks should behave in the context of the growing popularity of Fintech – try to imitate them, compete, collaborate with them or just take a wait-and-see attitude to see how Fintech will work in the full economic cycle realising that many of them are still very young and did not survive the financial crisis; in addition, there are economists who point out that most modern Fintech companies have not yet gone through the full economic cycle. But let's not be jealous because there’s a time and a place for everything; moreover, the key to successful future activities of both banks and Fintech is “cooperation” not confrontation. Change as a driving force While the debate about the role of classic banks and Fintech in the financial industry is currently very relevant, it must be remembered that the financial industry is changing, and these changes are welcome and inevitable. For instance, in the 60s and 70s of the 20th century, the use of aviation services was very expensive, unsafe, and also less effective. Just imagine that the aviation industry could remain at the level of the 70s! Currently, such airlines as Ryanair provide low-cost flights, the fact to which we have already got accustomed and which in its time could be called Fintech of aviation; there are still world-class airlines such as Lufthansa and British Airways whose classic and proven service has a large number of supporters. There is enough space for everyone, and consumers with their choice and purchase will dot the i's and cross the t's and show what exactly they need and what is most useful for them. The same goes in the financial sector. I am absolutely not one of those who speak of an imaginary war between people and robots, the human brain and artificial intelligence, banks and Fintech because, in the end, everything is decided by the consumer, the customer who chooses a particular service. I sincerely believe that the market is large enough for traditional banks with a large capital base, financing and solutions for many people as well as for private banks without call centres, and private players that can think though the problems and questions of each individual customer. Likewise, there is a place for Fintech with its democratic and affordable financial solutions. It is for customers to decide with whom to collaborate. Banks' strengths are customer knowledge, compliance with requirements, trust, security and experience of credit organisations, while the advantages of technological companies are their flexibility, technological solutions, social networks, the ability to quickly adapt to changes and speed.   More affordable investment opportunities and the future of Fintech Many Fintech companies have already entered the market and work as startups. It is not yet known whether they will grow and eventually occupy a large share of the financial sector, or they will rather occupy niches and provide specialised services to larger institutions. Large traditional banks also invest in financial innovation and have created Fintech units in organisations. Some of them adopted Fintech companies or established partnerships with them to provide specialised services. The decisive role of technology distinguishes Fintech from traditional banks, but many traditional banks also implement Fintech solutions and, in some cases, enter into partnerships or even acquire Fintech companies to increase their innovative potential. It cannot be denied that Fintech companies make investments more affordable, provide free capital flow, stimulate change, and provide comprehensive financial services that are accessible to more people, better serve people's daily needs and act in accordance with the new generation of investors. In 2018, Fintech deals and financing set new records in the Fintech world reaching over $ 39 billion worldwide (CB Insights data for 2018). Stricter regulation It should be noted that Fintech’ success is partly due to rather weak regulation in this industry as companies can manifest themselves more freely, adapt more quickly and modify services easier. Until now, the Fintech industry has not been strictly regulated, for instance, in comparison with classical banking services, where regulation is very strict. As a result, Fintech now has some advantages, but it also undermines customer confidence. I believe that in the near future the Fintech industry will also undergo stricter regulation which may affect the future prospects of some market players and their ability to develop in the fast-growing Fintech industry. Regulation increases confidence in the business, you can rely on it more. Strict regulation is already being introduced throughout Europe. I predict that the regulatory environment will change for both non-bank lenders and investment platforms. Collaboration between banks and Fintech If a few years ago Fintech positioned themselves as eccentric rebels, the smartest Fintech companies and the smartest banks are currently moving towards partnerships in the service sector at various degrees and at different levels.   In general, there are various forms of cooperation between classic banks and Fintech in the industry. If some time ago Fintech was considered as a potential threat to banks and the banking industry as a whole, now they are talking about cooperation and mutual benefit. Fintech companies can support banks by providing specific services, solutions, such as risk analysis services. Baltic International Bank also uses Fintech companies as service providers. Currently, the Bank is in the process of change successfully introducing a new business model; therefore, it is necessary to adapt many new ideas and methods. We work with Fintech and sometimes choose Fintech companies in Latvia and the Baltic countries to offer classic banking services. Here is one example of how a classic bank can work with Fintech. We are a client of the American rating agency Sigma Ratings which uses an advanced technological approach to assessing management effectiveness and the risk of financial crime at the organisational level. At the beginning of this year, the company also conducted an independent assessment of Baltic International Bank assessing the risks of organisations related to the prevention of financial crimes, management, sanctions, corruption and reputation. The company did all of that online using a methodology based on best practices of the industry. Fintech perfectly complements classical banking making it possible, for instance, to make use of available data and offer data analysis services more reasonable since today data is more valuable than gold and oil. The term Insight Driven Organisation (IDO), an organisation that uses analytics, data and its contribution to all decision-making processes, is gaining popularity. Stable banks and flexible, adaptable Fintech We can enthusiastically introduce innovations trying to catch and test every new trend, technological innovation and offer, but it’s worthwhile to return to the basics and realise that stable, boring, predictable banks with large managed capital are needed in order to develop prosperous society. Banks that have survived both financial crises and boom times. Banks that understand business cycles and their associated volatility. Fintech companies are amazing, but only time and a full economic cycle will crystallise the strongest players in the industry. Fintech companies are flexible and adaptable, but traditional banks also invest in technology and expand their digital banking services and offers. In general, we can conclude that financial technologies are developing and becoming more effective. This is caused by competition between Fintech companies and the traditional banking sector. The good news is that Fintech challenges traditional banks to grow and improve which is very convenient for consumers as new solutions and ideas help meet customer needs more effectively.

Viktors Bolbats: “Baltic International Bank on its way to become a strong investment bank”

For the Latvian banking sector, the past year turned into a storm. The Open City [Открытый город] Magazine speaks to Mr Viktors Bolbats, Chairman of the Management Board of Baltic International Bank, one of the oldest Latvian banks, about how the bank is coping with the new challenges. Strategy 2.0 Baltic International Bank (“BIB”) started a major transformation in respect of structural changes, business strategy and personnel policy last year. A new term – Strategy 2.0 – was even created. Are there already any first results that we can talk about? The past year was very intense for the Latvian banking sector, and the intensity still remains. A major sector overhaul is under way as Latvian Prime Minister Krisjanis Karins put it. Despite the fact that changes require enormous resources, particularly in a small bank, last year our bank has succeeded in many ways. First of all, it concerns changes to the business model, a modern challenge that I call “the substitution of income”. What does that mean? Earlier, transaction fees represented a significant category in the income structure of Baltic International Bank. Now our model prioritises income from fees collected by providing services with high added value. This is how it happens. The bank gains income from commission fees, interest and other types of income (transactions on FX markets etc.). Income from interest represents income from risk exposures, loans issued to borrowers, and guarantees. The extent of risk exposures for a bank largely depends on the size of the bank and on the size of its capital. Income from commission fees is something that a bank can generate almost regardless of its size. It’s the bank’s field of activity, it’s our price list, customer policy, it’s the customer interest in the bank. And the challenge for us was to replace the income we earned in transactions on the foreign exchange market in the past with income from commission fees from the provision of services with higher added value: these are brokerage services, transactions in securities, individual customer service. In 2018, Baltic International Bank set a record in this field by collecting nearly EUR 10 million in gross income from commission fees. Yet another task that we faced was increasing the operational efficiency, since changing the business model also means evaluating the bank’s cost components. As a result, during the first months of the year the balance before savings showed that the bank was operating with a profit, which is a good result in the current market conditions. We saw a record growth in all priority areas: the total amount of customer funds reached half a billion EUR at the end of the year. This is a huge amount for us, and we are very pleased with this. Why is it important? Servicing customers with such large financial resources at their disposal provides an opportunity to offer services to these customers; these are financially reliable customers matching the level of our commission fees. It is important for us to see dynamics in our total customer assets, and we see it. Has the customer portfolio changed a lot during this time? While currently we do not have a record-high number of customers as there are customers whose accounts have been closed as a result of our risk management policy, and there are also customers who are closing accounts by themselves because of our requirements which they are unable to meet, it is important for us to attract new customers, and we are looking for points of relevance on the local market. I would like to stress that we will never be a retail bank: we have no branches, no ATMs, this is not our way of doing business. It is important for us to protect the right to conduct business on an international scale, to structure the grid of our services, our tariffs so as to retain relevance for local customers as a bank. Never before have we opened as many accounts for local customers as we are opening these days. About one half of all new customers of Baltic International Bank are locals. It is a good indicator. A half? Does this mean that you have not given up on foreign customers? By no means! Foreign customers are present at our bank in sufficient numbers: we have got customers from Estonia, Lithuania, Germany, Austria, Ukraine, all of which are foreign customers from the viewpoint of the Latvian banking sector. Managing Capital Properly Speaking of the local market, Latvian businessmen often complain that getting loans from banks has become much more difficult now. How are you doing in this respect? We do provide loans to local business. In terms of areas of activity we provide loans for real property, consumer goods industry, food industry, we have experience in supporting initiatives in the service sector, we are also taking our first steps in agriculture, farming sector etc. What are the common points shared by all of these projects? They are owned and managed by ambitious entrepreneurs who orientate themselves well in respect of business risks, who need a bank capable of delving into the proposed transaction, a bank that can provide services on an individual level. At our bank, individual attention is paid to each case. Over the last 12-18 months, we have supported local business by loans totalling ca. EUR 15 million, which is not a small amount for us by any means. At present we are seriously working on improving cooperation with ALTUM, a state-owned development finance institution, which has excellent tools for ambitious entrepreneurs and exporters. For start-ups? No, not start-ups, though we are no strangers to this direction in business. We have an investment in the Imprimatur Capital Fund, a venture capital fund, thanks to which funding has been provided to various start-ups, for example, to Sonarworks, a well-known Latvian company working on acoustic calibration, and to Molport, an innovative company operating in the field of chemistry. ALTUM will help us in providing loans to businesses which already exist but need to expand and develop. Actually, lending to local businesses is one of the priorities of Baltic International Bank. The situation in the industry has created a large demand for loans from local private businesses, we receive more requests than we can process in a year. Money management is another important topic for our bank. I have already said that, in total, our customers keep nearly half a billion euros in various forms at the bank. Merely keeping a million that you have earned by honest means at a bank has become more expensive today: this involves both commission fees for services as well as audits. Therefore we offer co-funding projects to our customers with the involvement of the bank. Our experts do a 100% analysis of the project and the customer can, based on our analysis and market knowledge, participate in the project with profit. If the project meets the criteria of profitability and reliability that we have set for ourselves and for our customers, we offer our customers a co-funding scheme for the project together with the bank. Here we must take into account that such transactions have a 3-5 year horizon as a rule. We understand, however, that it is not profitable to keep funds in the bank account in amounts that can be regarded as long-term capital in terms of their profitability, and it would be a shame not to take advantage of the opportunities offered by the developing Latvian economy and the growing need for financing which exceeds the ability of banks to provide loans. These are the main major prerequisites for large investors and active entrepreneurs to come together for the mutual benefit. The bank acts as a partner, with all parties deriving benefit in these circumstances. Top-Level Control You have made large investments in the anti-money laundering (AML) system, both in people and in technology. Is the control mechanism fully developed now as a result of these investments? Absolutely. The Tonbeller System, with separate modules for sanctions, embargoes, AML, beneficial owners, Dow Jones databases, is a global approach to due diligence in respect of customers and the economic activities they are involved in. We have a great experienced team, real professionals in the international banking sector. It is sufficient to say that the Council of Baltic International Bank includes Mr Joseph Cofer Black, former head of the CIA Anti-terrorism Center, former ambassador-at-large of the US State Department, and coordinator of counterterrorism activities, and Dr. Hans Friedrich von Ploetz, former German ambassador to NATO, UK, and Russia. In 2018, a colleague of ours from the Management Board of the Bank received a CAMS certificate which is an internationally recognised certificate in the field of AML, and now we have 5 more colleagues at the bank in the middle of the process for obtaining this certificate. Enormous resources are used for the control mechanism, and the bank is spending from EUR 800,000 to EUR 1 million a year to maintain the IT systems and to keep specialists at the bank. Investments in this area will continue. For Baltic International Bank, there are three key areas in terms of staff. The first, of course, is compliance with AML regulations. The second is bankers – our face. Requirements for them are growing not only from aspects like "know your customer" and "know the rules of the game in the sector". Being a private banker is more difficult today, one has to be familiar with a variety of topics, legal issues and other issues relating to or faced by customers. Here, I think, we will replenish our staff actively. And the third area, where we compete with the entire market, is IT specialists. Baltic International Bank has received a positive assessment from the New York rating agency Sigma Ratings in the field of prevention of financial offences recently. What does this mean to you? Expert opinions are very important in the banking business. And the assessment by Sigma Ratings is a momentous occasion for us. This American company analyses hundreds of banks using a new method. You see, in the area of bank audits, there exists a classic approach, and now there’s a new one. The classic approach is when an audit or external assessment is carried out in the direct presence of auditors at the bank where they check and re-check everything during this period of time. Sigma Ratings uses modern technologies actively. I had an interview with the management of Sigma Ratings in Washington over a special video channel. We communicated with each other, including by remote means; it was, of course, a very economical and efficient way of communication, they didn’t need to fly over from America, and there was no need for us to fly to America. Nevertheless, the testing was quite demanding for the bank. For example, the auditor entered prepared payments containing a small element of risk into our system which the system was expected to identify successfully. This was a unique experience, and the BBB+ rating we got is a good rating the description of which, among other things, includes the following phrasing: the control system is adequate for the model chosen because not every model needs the same control system. It was a wonderful conclusion for us; we shared it with the regulator of the banking sector, our partners and correspondent banks. However, we are not going to stop at that. Baltic International Bank is currently negotiating with our partners in the USA and major local partners on performing an external evaluation of our systems to show once again that we actually correspond to the level that we’re at. Old Money, New World! In May, Baltic International Bank held a large investment forum. In contrast to the previous years, it was not only customers of the Bank that were invited, there was also a wide range of guests. What necessitated such changes to the forum format? This year our prestigious investment forum “Old Money, New World” brought together a range of extraordinary personalities, people famous in the world and in Latvia, and powerful minds of the present time, starting with our honoured guest and main speaker Mr Charles Morgan who shared his heritage, conclusions and far-sighted ideas. The forum provided an opportunity to communicate with more than a hundred customers from the private banking segment, business partners and stakeholders. The central theme of the forum was “Wealth inheritance: the path to financial security and confidence.” This year we selected an open format for the forum, with the participation of customers, both current and potential, of the Bank, partners, institutions located around the bank, representatives of the stock exchange, large consulting companies, and entrepreneurs. It was sort of an experiment. It is clear that this format is aimed at attracting new customers and projects. How do you see the future of Baltic International Bank? The message of our forum is clear: we are in motion, we’re creating something that should be relevant for the customer also the day after tomorrow. We are very pleased with the outcome of this experiment. One needs to position oneself loud and clear. One must say honestly: Look, colleagues, we are primarily a bank, we open accounts, handle customer questions, grant loans, issue guarantees etc., but we also believe that two large groups – those who need funding for projects and those who own such funds – must come together to derive mutual benefit. We believe in it, we are building this, but we have to do it together with you, we cannot do it in isolation from you. Of course, ten out of ten potential partners will not necessarily say: Yes, like you, we too believe in, for example, the sector of energy without the CPC (compulsory purchase component) which is developing thanks to technology and not subsidies, which is developing thanks to honest and ambitious investors rather than state support. But if three out of nine potential partners will say: I believe in it, I want to learn more, this will be a success. If three more people will ask: Have you thought about this and this? Have you taken into account this and this, this will be an even greater success. And three more will probably say: I don’t know anything about the sector of energy, I can’t participate in it, I’m waiting for another offer. And this will be a success, too. Baltic International Bank remains an investment bank capable of offering classic services as part of our approach to individual services, we have the competence, products and services which allow directing customer funds, including in projects of real economy, in which the bank participates in the role of experts, partners and co-financiers. We understand what the Latvian economy needs, and we see our natural place as part of this economy. Baltic International Bank does not need to invent a niche for itself; we are a privately owned bank with owners from Latvia, we don’t need to look for points of contact with the local business: we have been flesh and blood of this very business for 26 years now, and we’re staying. This is a logical choice for us, this is a niche in which we are already present. Speaking of the industry as a whole, we feel we are a stable player, we have a strategy, and we need time to implement it. We feel steady even if it is chaos that surrounds us. The present time checks and rechecks everyone and everything. Tatjana Fasta, magazine “Freecity”, 07.06.2019 Interview in “Free City” with Viktors Bolbats. (RU)

World experience in combating money laundering – Joseph Сofer Black

In an interview with the newspaper Latvijas Avīze, Member of the Supervisory Board of Baltic International Joseph Cofer Black talks about world experience in combating money laundering and upcoming challenges on the Supervisory Board of Baltic International Bank.     What is the global situation with the dirty money in the world – is it improving or getting worse? Honestly, this question is almost like a question about religion – is its impact increasing or decreasing? Speaking on the macro level, I can surely say that during the recent period the flow of “dirty money” has always existed in the world. By the recent period, do you mean beginning from the September 11, 2001? Or is it when everyone started to pay attention to that? I would say earlier. At least looking from the US perspective, the story about the “dirty money” starts with the war against drugs. Disregarding the huge resources devoted to combat this phenomenon, very rarely were these activities able to significantly impact or change the “street price” of drugs. And if the price does not change – then there isn’t real consistent success in the fight against drugs. Yes, they shot Pablo Escobar and caught El Chapo, took down some of the drug cartels but others formed all too quickly to take their place. What to do next? In these circumstances, the law enforcement authorities came up with the strategy of “follow the money”. Logistics and putting the generated profit back into the financial system are the weak links of the drug distribution system. If we can’t win in the logistics area, then finances remain. I remember that during those times, in 1980s and 1990s when I was going to South America and visiting a port or beach, motor boats with powerful engines worth more than a million USD stood side by side just like cigarette packages on the shelf– dozens. They either belonged to the drug dealers or were taken from the drug dealers – and their task was to transport drugs. If your business can write off losing vehicles worth more than million USD as the cost of doing business – then your business is inherently highly profitable. These were the circumstances when the strategy changed – instead of trying solely find and disrupt the logistical side, try to follow the money and compromise the heads of the drug cartels. As you mentioned the September 11 attacks, they occurred when I was the Director of the Counterterrorism Center in CIA. In the beginning, we were not that successful with the concept of “following the money”, concerned that it might take away already limited resources in other areas. The second limitation was related to the fact that unlike the drugs target, terrorism does not require a lot of money. It was not expensive to organise the September 11 terror act, maybe a few hundred thousand USD. It is pocket money compared to the amount of funds involved in drug trafficking. It is difficult to trace a small amount of money. Still, gradually the intelligence organisations started to do just that in cooperation with international partners. I have to say that results were better than expected; still it is very difficult to disrupt financing of terrorist units. Best results are obtained when we monitor the financial system and search for anomalies therein but, of course, we also have to deal with political limitations. Speaking about limitation of “dirty money” and policy...I would dare to say that there is a feeling in the Latvian financial circles that the report of the US Financial Crimes Enforcement Network (FINCEN) about the ABLV Bank and the following actions were too harsh, unjustifiably emphasizing Latvia. Meaning that money-laundering problems exist also in other countries and Latvia already since 2016 started reinforcement and control of the anti-money laundering requirements. I have been to few countries where Americans are not considered part of their issues. And my Latvian friends think just like you. But what would you have us to do?  There are so many crucial questions/problems and we have to deal with them and the tyranny of time no matter how noble the intentions. But dissatisfaction by one partner with the other in a relationship may well be expressed in a clear and obvious manner. Let’s be honest – this is my 14th time in Latvia already, I really like Latvia and its citizens.  But before I made a decision whether to come and work here, I did a little research. Reputation of Latvia on the internet was not especially good and happily, incompatible with reality. However, during the last decade we have witnessed multiple violations of the anti-money laundering regulations. It is not fair to blame Americans that they are protecting their interests and deciding to send a clear message, in the situation when other methods have already been tried before. Only those who do not know the background of the relationship can do that. I have heard all the following - “this bank was made a victim”, “it is not true”, “this is false news” and even - “Russian special services stand behind that”. Nonsense! “Money laundering on the “systemic” level, as was reported in the FINCEN report – is a checkmate game. A charge not made lightly. Systemic is a serious term. Systemic – it means that an integrated system has been created at an organisational level, performing money-laundering activities regularly and repeatedly. And as a cherry on top - “money laundering on behalf of North Korea” cannot be ignored. Find me another country on the world map with whom US has relations that are more difficult and where money-laundering activities on its behalf could infuriate Americans more. What do you expect the US would do in this situation? And how long can Latvian banks participate in the money laundering activities for the financial system state reputation not to suffer?  In this case, you can call US action tough love; it is based on good intentions and genuine desire to help the system that is struggling on its own. As the Head of the FCMC Pēters Putniņš have stated publicly – in the case of North Korea, money laundering the means were coming from some European banks, passed through Latvia and returned to other European banks. Why the role of Latvia was emphasized? Why there isn’t similar FINCEN reports about other European banks? I am not in the situation to comment on statements by Mr. P. Putniņš. And there were reports about other banks as well that might not have attracted so much attention. Still, I stand by my words. The US administration has neither time, nor energy to deal with made-up things. Reading the FINCEN report in its entirety, it is clear that the US was highly motivated to send a clear message. And believe me – these reports were not compiled by a random official pointing his finger at a map and haphazardly choosing a country to target. Compilation of these reports includes combined work by many institutions and the results reflect a coordinated view. Majority of the money flowing through the Latvian banking system come from the CIS countries, first, from Russia. In considering the difficult relations between the Western world and Russia, why would we worry that money is flowing out of the Russian economy, taking away resources for investments, and being spent in Western countries, buying mansions on the Mediterranean coast, insanely expensive yachts and English soccer clubs? Here I agree with you – maybe we should not worry. Although the relations with Russia have become more complicated, still the majority of Americans like Russians – the way they perceive themselves has many similarities with the way we Americans perceive ourselves. We could ask why Russia had to adopt such quarrelsome and aggressive attitude regarding international issues and why Vladimir Putin has to publicly demonstrate short films about aiming of nuclear weapons on the targets in US. When Russians are buying mansions in Italy, I am more amused than worried. You want yachts – be my guest. Real estate in New York – wonderful. What concerns me is that the source of this money may originate from the diversion of state funds and fraudulent privatization. If you look what people are included in the US sanction lists – then the depressing majority are people who became rich using methods considered illegal in US. Some say that US is hindering the development of Russia.  Russia these days can be its own worst enemy. But democratic and stable Russia full of satisfied and content people is in the interests of US. And it would be much better to invest the money spent on mansions and yachts in Russian infrastructure, social services and education. Do you have many colleagues who with the previous work experience in intelligence services, combatting the financing of terrorism and money laundering, and diplomatic services start working in the banking system of the Baltic’s? It is a good question as work in the financial system has many similarities to intelligence and diplomatic services. Many principles are the same – know what you are dealing with, protect your own people and our friends, invest in the future, effectively use the limited resources to reach your goal. In fact combatting of money laundering is my main task as the Member of the Supervisory Board here in Baltic International Bank. One of the main directions of this work remains unchanged - establish and improve mechanism, system identifying risky clients, and determine potential risks in this area. Nevertheless, answering to your question – no, I don’t see the inflow of American specialists. I see more representatives of some other European countries.   Olafs Zvejnieks, Newspaper Latvijas Avīze, 14.05.2019   Interview Latvijas Avīze with Joseph Cofer Black (LV) 

Plenty of Challenges for Europe -Dr. Hans-Friedrich von Ploetz

In an interview with the newspaper “Dienas Bizness””, Member of the Supervisory Board of Baltic International Bank - Dr. Hans-Friedrich von Ploetz emphasizes that, given the rapid development of renewable energy resources, our only chance is to become “greener”. Would he currently invest into oil, gas or coal? He would most likely say - no. He would rather invest in new sustainable technologies. Although significant progress have been achieved in adjusting of the financial sector, industry still has to deal with many problems and risks. Dr. Hans-Friedrich von Ploetz, Baltic International Bank Member of the Supervisory Board, former State Secretary of the Federal Foreign Office and German Ambassador to NATO, the UK and to Russia in an interview with business paper Dienas Bizness. He tells that attempts to adjust this industry on the European level are highly supported, emphasizing that various future challenges and risks await the industry players also further. How do you evaluate ongoing processes in Latvian financial sector – does society need to worry about stability of this sector? Banking industry is operating under stressful conditions all around the world. I can’t name a single country where people would not follow updates in banking sector due to various risks, for example, money laundering and terrorism financing. These risks are very challenging. I think that progress have been achieved in European Union (EU) countries, including Latvia, as to this matter, still it is not yet the time to relax and let our guard down. In recent years banks working with non-residents have encountered more problems. What is your opinion regarding this issue – have these banks really committed violations? Everyone can follow latest updates from Russia, Estonia, Finland and other countries. Of course, we can’t deny that violations did happen in separate cases but I don’t want to highlight any country in particular. It is clear that this issue still requires further efforts and task is not easy. Efforts of Latvia have been evaluated positively; at the same time we have to understand that improved international cooperation matters a lot. One cannot overlook that in this area sometimes good regulatory framework can be an obstacle to such cooperation. I think that banks are doing what it takes to eliminate risks related to non-residents. If I am accurately informed, during recent years dramatic decline of non-resident clients have been observed in Latvian banks. Regarding non-resident banks the loudest scandal in Latvia, of course, was ABLV Bank. How do you evaluate this situation? It is very sad that a bank of this size can file for bankruptcy within few days. It has a negative impact not only on clients concerned but also reputation of state and its banking sector. What should be done to improve Latvian banking system? In my opinion, the Latvian government, its regulators and the banking sector is trying to improve the Latvian banking system not only on the national but also Eurogroup level. I am afraid these efforts have to continue in all spheres, with special attention to improving the qualification of personal and technical resources. Sadly, those forces who try to break the rules do not give up their efforts to succeed one way or the other with their illegal activities. Both regarding employee qualification and technical equipment, and information exchange between banks, banking sector in every country still encounters very many challenges and risks. Power industry has become one of European priorities during recent years. What are global trends as to this area – are we becoming greener? Politically – definitely. Our publics are much better informed and ask for action. Therefore I think that we have no choice but to “greener”. Very ambitious goals were set in Paris Climate Conference related to global warming and climate change. Both EU countries and the EU in general are on the right track. For example, Germany reacting to the nuclear accident in Fukushima decided to completely waive use of nuclear power in the next few years. The risks involved in nuclear power plants is considered to be too high and dangerous for both environment and climate. In addition, Germany also wants to stop the use of brown coal – lignite in power plants in the near future and of other coal in the medium term. At the same time it is clear that demand for electrical energy will grow considerably in Europe as we use evermore electrical appliances on daily basis. How we are going to satisfy this dramatically growing demand? Renewable energies are one option and they are rapidly developing. Germany was a front runner and subsidised solar and wind energy at great cost, in particular to its consumers. The effect is impressive: renewable energies compete today successfully with fossil energy. Whether I would continue to invest into oil, gas or coal, I would most likely say - no. I would rather invest in new sustainable technologies. There are many negotiations related to high RES scenario and energy efficiency but frequently entrepreneurs emphasize high expenses in implementing of these solutions. Can we expect for green technologies to become cheaper in future? Of course, these technologies are expensive but we have to keep in mind that they were even pricier in recent past. Technological development is enormous, with emerging markets like China in the vanguard. At present, developed countries consume about 40% of energy and the high growth, economies of Asia 20%.  Experts predict that it will be the other way round in 20 or 30 years, but the global volume of energy consumption will be much higher than today!  So we have to act fast: The global train is gaining speed, and European economies occupy no longer the first carriages. Already today China has more electric cars than Europe. Several European countries have already expressed commitment to completely stop using fossil fuels. In your opinion, is this necessary and actually doable? When I arrived in London in 1999 as the German Ambassador to the UK, one of the first people I met was the CEO of British Petroleum (BP). We spoke for more than an hour but he hardly mentioned BP’s core business, petrol. He spoke about green energy and green technologies. He said it is our future, emphasizing that he as a CEO is responsible for this company to continue operating profitably. He was right, wasn’t he? So, you think that we can really stop using fossil fuels in future? There are more than meets the eye as to this. We need fossil fuels but it is stupid to burn oil for electricity or mobility. Remember that you can get to a goal in many different ways. Clearly our lifestyle will change in the future and I don’t think it is a bad thing. At the same time, I think that in future fossil fuels will be used more efficiently in many other areas. I hope that inefficient and environmentally harmful use of fossil fuels will be reduced but still these resources will find their place on the market. You mentioned that currently you would decline from investing in the fossil fuels industry. On what resources would you put your money on? Let me give you one example: There is an innovative company in Latvia specialising in the construction of large concrete floors, for example for large stores, warehouses and industrial buildings. Its new technology allows them to reduce the consumption of cement by 40%. Thus, they not only reduce the use of energy to produce cement, the entire construction process takes up less time. Thanks to a special new mix of raw materials, their floors are almost immune to cracks – which used to be a big problem of the industry. Three advantages in one technology - excellent! Would I invest in this company? My answer is definite - yes! I could give you hundreds of similar examples. You are the former German Ambassador to the UK. Currently many Europeans are concerned about this country and its further decisions. What should be considered after Brexit? I have noticed two opposing parties as to this matter. There are people considering Brexit as a relief because it has always been difficult to cooperate with the United Kingdom, the British were not even sure if they wanted to be part of Europe in the first place. The other group, to which I belong, thinks the UK leaving the EU will be a great loss. The future will be very different from the past.  Europe is no longer in the lead. The United Kingdom was large and powerful power in the 19th century. In the 21st century which European country is powerful enough to successfully stand on its own? Not the UK, not Germany, not France! In contrast, the EU is a very powerful organisation – a serious global player – but only in such fields as trade where its members have pooled their sovereignty in the hands of the EU-Commission. If and when Brexit happens, we will have to learn to live with the new situation, yet another challenge, but unfortunately “home-made”!   Armanda Vilcāne, Newspaper Dienas Bizness, 02.04.2019   Expert opinion. Interview Dienas Bizness with Dr. Hans-Friedrich von Ploetz

Baltic International Bank receives BBB+ financial crime compliance rating, with a positive outlook

Sigma Ratings, a New York-based rating agency, assigned BBB+ financial crime compliance (FCC) rating to Baltic International Bank placing it among industry leaders. Sigma’s report also noted that the bank’s outlook is positive. Sigma Ratings reviewed Baltic International Bank’s inherent risk environment and control effectiveness around FCC. The review included FCC factors specific to AML, CFT, sanctions, and aspects of other non-credit risk issues such as geo-political risk and national-level regulatory proficiency. Chairperson of the Management Board, Baltic International Bank, Viktors Bolbats told: “We are truly delighted by the positive assessment of the renowned rating agency Sigma Ratings as it demonstrates that our hard work and increased investment in the area of fighting against financial crimes have paid off.  Baltic International Bank firmly believes that privately owned banks need to shape a sustainable business model with the underlying corporate governance principles and transparency in all actions, including the fight against criminal crimes.”   Some of Baltic International Bank’s key strengths, according to the Sigma Rating report, include its increased investment in compliance, both in headcount and technology, as well as sophisticated transaction monitoring system (TMS) with a comprehensive list of detection scenario rules. Baltic International Bank has advanced controls in place in order to mitigate against financial crime.   Baltic International Bank deserves credit for embracing transparency and investing in its financial crime control environment.  The rating speaks to a relatively strong control environment and an engaged management team that recognize the importance of proactive risk management across all three lines of defenseStuart Jones, Jr., Chief Executive Officer of Sigma Ratings     In light of the overall situation faced by the sector, in 2018 Baltic International Bank invested money towards enhancing professional qualification of its employees and their expertise in the fight against financial crimes in accordance with international standards. For instance, all of the employees involved in implementing the Know Your Customer (KYC) and Know Your Customer’s Partner (KYCP) principles have undergone an in-depth AML/CFT training. The Bank has revised AML/CFT policy and related procedures and implemented new amendments requested by regulator. The Ministry of Finance (MF) and the State Revenue Service (SRS) have admitted Baltic International Bank to Gold Level of the In-depth Cooperation Programme or so-called SRS White List, thereby acknowledging the transparency of operations as well as tax compliance discipline.   Baltic International Bank Financial Crime Compliance (FCC) Rating Report   About Sigma Ratings Sigma Ratings, Inc. (“Sigma”) is a New York-based firm pioneering a technology-driven approach to assess governance and financial crime risk at the entity level. Sigma evaluates entities on non-credit risks, including financial crime compliance, governance, sanctions, corruption and reputation. Sigma’s methodologies are based on industry best practice that have been developed in consultation with the public and private sector. Sigma’s ratings are also reviewed by an independent Rating Committee before issuance. Sigma regularly presents to U.S. regulators and regulators around the world for further feedback and ideas. Sigma’s leadership team includes professionals with more than 100 years of combined experience, including deep domain expertise on counter illicit finance-related matters as senior U.S. Government, legal and development finance experts. Company clients include financial institutions and investment firms, multinational companies, insurance firms and governments in the Americas, Europe, the Middle East and Southeast Asia.

Valeri Belokon: The existence of our nation in 200 years depends on literature

Valeri Belokon, the main shareholder of Baltic International Bank and the long-standing patron of Latvian literature, who also supports the current project ‘Library’ aimed at promoting reading, believes that the existence of the literary industry is of great importance for our entire nation. Preserving literature, we preserve the Latvian culture and language. What do we leave behind, apart from language? We leave the thoughts of our people. If we lose the word, we lose the thought. Books should be published to enable us to keep a big, complete, philosophical thought.Valeri Belokon   In the seventh interview in a series of video stories within the framework of the ‘Library’ project, Valeri Belokon gives a peek into his private library and tells about his personal motivation prompting him to provide support. The books have everything that we need for our life and for the life of our soul,’ he says. ‘Support to literature is my vocation and the voice of my heart. A person can support literature only if he or she understands it and needs it. It is not that literature goes with hat in hand.Valeri Belokon   The patron also expresses his views on the role of literature in the preservation of the Latvian language. ‘We are in a situation where we need to maintain our language and culture. I believe that this is what we are doing at the moment and what definitely have to keep doing.’ In an interview with Baltic International Bank, the main shareholder points out, through laughter and, at the same time, very seriously, that all the answers to questions can be found in books. ‘Nowadays, people think that Google has all the answers, but I have to disappoint them by saying that this is actually not true. Books provide all the answers,’ he says. Watch full interview The full interview with Valeri Belokon is available on the home page of the ‘Library’ project at www.manabiblioteka.lv. There you can also find six other interviews published before: with writers Nora Ikstena and Māris Bērziņš, Zbigņevs Stankēvičs, metropolitan archbishop of the Roman Catholic Church, Andris Vilks, director of the National Library of Latvia (NLL), Kārina Pētersone, director of the Latvian National Library Support Society, and Vaira Vike-Freiberga, former president of Latvia. In the coming months, it is also planned to publish an interview with Uldis Bērziņš, poet and translator, Imants Lancmanis, Latvian art historian and heraldry specialist, and Sanita Stinkule, head of the Department of Ethnography of the National History Museum of Latvia. The project ‘Library’ has been created by Baltic International Bank, a long-standing patron of Latvian literature. The ‘Library’ initiative proposes to tell stories about the importance of literature in people’s lives, stories about personal libraries, their content, emotional and professional value. The development of Latvian literature is one of the long-term public support endeavours of Baltic International Bank. Believing that knowledge of culture and history of one's country is the basis of the national identity of each nation, Baltic International Bank financially supports the publishing of books of national importance and implementation of literary projects.

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