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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, 11.08.2019

"Green" and "profit" are compatible

In the interview with Latvijas Avīze, Viktors Bolbats, chairman of the Management Board of Baltic International Bank, shares his views on green bonds and changes in business thinking on environmental issues.   Willow tree budding in February and autumn days in July make investors think about transforming the economy in line with climate change. The example of the Scandinavian countries shows that green bond issue can also become a permanent agenda item. In Latvia, the first few steps have been taken in this area, and the path to follow has been marked. Of course, Latvia, like any other country or region, is significantly behind the level of green thinking in the Scandinavian financial world. To the north of us, the public demand for green investments and solutions for green investments is much higher than in other developed countries. The basis for obtaining the so-called green loans in Scandinavia, which is proud of its rich forests and rivers, is the availability of green bonds. We included the green component in the Bank's strategy at the end of 2016; the concept is called ESG (environmental, social and governance) and implies caring for the environment, social responsibility and following the principles of good governance. This is one of the commonly accepted ESG principles actively discussed this year by the ECB and the European Banking Authority, and I think that the emergence of this concept at the regulatory level is just a matter of time.Viktors Bolbats   Green financing in Scandinavia The debut of green bonds took place in 2010 in Norway and was implemented by Nordic Investment Bank in conjunction with one of the Norwegian state banks – KBN Kommunalkredit. A green bond means borrowing money in the financial market, i.e. bonds are issued and such securities are bought by investors thereby lending money to the issuer – a fund, a bank, a company. Of course, such bond is declared green from the very beginning – there are specific rating agency indicators that reflect the presence of the green factor. A company issuing a green bond in its prospectus announces to the market that it will use borrowed funds for environmentally and socially friendly projects. An example of such a company in Latvia is the green bonds issued by Latvenergo and Altum. “At the same time, it should be noted that in Scandinavia historically, especially in Sweden, there are a very large number of industries that are financed by banks and provide a large number of jobs, but are not environmentally friendly, for instance, the extraction and processing of minerals and fossil fuels,” Viktors Bolbats, Chairman of the Management Board of Baltic International Bank, comments and adds: “I would not say that this is the main factor. Green bonds are undoubtedly a vector in the financial market, and the Scandinavians were among the first to plot it”. First in Central and Eastern Europe Speaking about us, it is necessary to take into account how young the Latvian economy and the Latvian financial market are. The NASDAQ Riga exchange parameters, i.e. the volume, size and number of issuers, are not comparable with the level of development of the respective institutions, for instance, in Scandinavia. These are incomparable things – the Scandinavians have gone a long way of development, their financial market is more developed, bank bonds are common for them, they have Nordic Investment Bank which is an international bank. Baltic International Bank has obtained a license to organise the issuance of bonds – we can provide companies with raising capital in the form of bonds. The fact that the bank can organise such an instrument for customers is called a mandate. Thus, the company gives the bank a mandate to attract financing. We already have some mandates given by the companies that are developing in an environmentally friendly manner. Green finance has long been not marketing, but an expression of civic responsibility. Turning to investor psychology, I will give a slightly rough example. If a company that does not pay taxes wants to borrow, the investor will think: “At some point, such a client may not pay its debt.” The same thing here – when it comes to green bonds, there are responsible people behind them who not only think about financial indicators, but also how much this investment will be needed by people in another 20 years.   Agnis Buda, for the newspaper Latvijas Avīze, 09 August 2019   Article in the newspaper Latvijas Avīze, ""Green" and "profit" are compatible” (LV)

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)

How world power relations affect commodity prices in the world - Konstantins Goluzins

“The conflict between the United States and China is a step in the opposite direction of globalisation which for many years has been the driving force of the global economy,” Konstantins Goluzins, head of the Asset Management Department of Baltic International Bank said to daily newspaper Diena. The rhetoric about the introduction or possible introduction of various trade restrictions in the future, combined with the already beginning slowdown in the global economic growth, also contributed to the reduction in industrially significant commodity prices on global commodity exchanges. The price of industrial metals, such as copper and aluminium, fell by more than 5% and 8% respectively in the last three months after its peak at the end of March. Investor sales didn’t leave out oil. The escalation of tensions in the Persian Gulf region is driving up prices for this hydrocarbon resource, while recent price trends have been negative. Namely, since the last local peak of prices at the end of April, the price of black gold has fallen by almost 16%. Although tensions in the Strait of Hormuz, connecting the Persian Gulf and the Gulf of Oman, have reached unprecedented levels, oil prices are now closer to the lows of the last month than to the highs which at the same time may mean that stockbrokers hope that the conflict will not escalate, and that economic background is not conducive to higher prices. The overall decline in commodity prices is a signal of falling inflation which may be favourable for consumers in the short term; but if this process drags on, it indicates problems in the global economy and, possibly, signals a new economic crisis. Bad background Konstantins Goluzins, investment portfolio manager at Baltic International Bank, draws attention to the recent difficult economic relations between the United States and China in the context of changes in commodity prices. “The price of raw materials in open markets depends on supply and demand. Taxes on one of the raw materials are transferred to the consumer which increases the final price of goods and thereby reduces the ability and willingness of consumers to buy the finished product which, in turn, leads to an overall decrease in demand,” K. Goluzins explains. He adds that with the exchange of new tariffs and public threats between the United States and China, prices fell not only for the raw materials that are under the threat of taxation in one of the countries, but for everything else. According to the expert, the conflict between the United States and China is a step away from globalisation which for many years has been the driving force of the world economy. “By imposing taxes and limiting trade, the economies of both countries will lose thus leading to a decrease in GDP growth rates.” Given the importance of these two countries in the global economy, the growth rate of the global economy will also decline. Due to that, prices for many products have fallen, since in the near future growth in demand for them is not expected.Konstantins Goluzins   Speaking of what is happening on commodity exchanges, Mr. Goluzins says that prices for most goods have fallen, and he believes that they are likely to continue to fall. According to the expert of Baltic International Bank, if disputes between the United States and China, as well as between the United States and the European Union (EU) are not resolved, the economic growth will slow down, and the demand for raw materials for production will not increase. At the same time, according to the expert, the opposite happens with the price of gold which is considered an asset buying which may help avoid the risks of a crisis. It is expected that the price of this asset will rise, K. Goluzins says. Should gold be bought? Replying to the question about possible price changes, Mr. Goluzins said that in the near future prices for such goods as oil, copper and aluminium will not increase because the rate of cooling of the global economy is obvious. “Of course, there is always shock when the pace of supply or extraction of raw materials can drop dramatically affecting the price of raw materials. In the near future, the price of gold will rise rather than fall as many still use it as a reliable asset to avoid financial market volatility,” an expert at Baltic International Bank says.   Martins Apinis, Newspaper Diena, 27.06.2019 (PDF)

The highest scoring category – Platinum Category – on the annual Sustainability Index was awarded to Baltic International Bank

The results of the annual Sustainability Index were announced on 13 June, and we are proud that this year Baltic International Bank won the highest platinum award. The Platinum Category is awarded to companies that have fully integrated corporate governance into their operations, and in which responsible persons have been appointed at both the managerial and executive levels. These companies systematically collect data and assess impact. They report on their activities with a high level of transparency and engaging stakeholders, and their published data was approved by the external auditor. Chairman of the Management Board of Baltic International Bank Viktor Bolbat says: “We are proud to be the first local capital bank to receive the highest rating of the Sustainability Index. The Bank managed to find new opportunities for development, overcome challenges, and successfully work on changing the business model and move towards the common goal – to become a strong and sustainable investment Bank whose activity is based on the internationally approbated ESG (Environmental, Social, Governance) approach". “The three pillars underlying the ESG approach – environmental sustainability, good governance and social issues – were and will be important for the Bank both as a business organisation and as an educator of our customers and partners. In recent years, we persistently worked to introduce the principles of corporate responsibility and sustainability for them to become an everyday aspect at all levels of the Bank,” emphasises Viktor Bolbat noting that one of the Bank’s core values ​​is Succession which implies taking care of the environment and its transfer to future generations. The Sustainability Index is a strategic management tool based on the globally recognised methodology that helps companies to assess the sustainability of their operations and the level of corporate responsibility in five areas: strategy, market relations, work environment, environment and society. The overall assessment of the company consists of achievements in all five areas; therefore, the integrated approach covering all areas of the Bank's activities is the only key to success. Realizing the strategic direction, Baltic International Bank actively works to change the business model providing the most profitable investment solutions for all financial needs and being a reliable, open and honest long-term counterparty who invests its knowledge, skills and resources for the benefit of society, too. In the field of environmental protection, Baltic International Bank can take pride in its environment-friendly approach and the reduction of a number of key environmental indicators as the effect of environmental concern. In particular, in 2019, the Bank significantly reduced water and heat consumption, and significant reduction in CO2 emissions was achieved. Enlightening employees and its partners, the Bank is on the way to changing attitudes, thinking, and everyday habits in terms of environmental issues. Baltic International Bank is one of the most visible and oldest supporters of cultural processes, science and sustainable business in Latvia concerned about the transfer of important values to future generations. “Library” is one of the largest projects of Baltic International Bank in 2019 offering to share with the public the stories about the role of literature in people's lives, stories about their personal libraries and content thereof. The project involves Latvian writers and other creators of Latvian literary life. It is in the categories of market relations and work environment that Baltic International Bank shows the highest growth and development since the Bank is aware of the importance of non-financial reporting, and its activities are characterised by the words “openness” and “transparency”. In these areas, the Bank chooses a proactive approach as it is entirely possible that the introduction of ESG principles and non-financial reporting will eventually become a binding requirement for this sector. Dace Helmane, head of the Institute for Corporate Sustainability and Responsibility, explains: “The Sustainability Index is a time-tested and improved tool recognised by Latvian companies for evaluating their work. In 2019, special joy was brought by companies that have been registering on the index for several years and demonstrating a positive dynamic of achievements, and also serving as an inspiring example for others. Baltic International Bank has been participating in the Sustainability Index for the sixth year still showing progressive growth, therefore finding Baltic International Bank in the highest Platinum Category this year is natural.” In 2014 and 2015, Baltic International Bank received the bronze Sustainability Index award; in 2016, – the silver award; and in 2017 and 2018, the Bank's performance was awarded a high-level gold award, and we are proud that in 2019 the company received the highest platinum award. This week, Baltic International Bank also received a positive assessment from the Ministry of Welfare, having (third year in a row) become one of the Latvian companies that was awarded the Family-Friendly Merchant status. About the Sustainability Index Since the development of the Sustainability Index in 2009, several other initiatives have been added that allow Latvian companies to not only get an analysis of their effectiveness and expert comments, but also qualify for a number of different awards, such as the Family-Friendly Merchant status, the Fair Trade award and the Leader of Innovations award, Region Power, etc. The initiative is implemented by the Institute for Corporate Sustainability and Responsibility, but is supported by the Employers’ Confederation of Latvia and the Free Trade Union Confederation of Latvia. Since 2010, about 300 companies have used the self-assessment tool of the Sustainability Index.

The Ministry of Welfare Awards Baltic International Bank the Family-Friendly Company Status

In 2019, for the third consecutive year, Baltic International Bank has received the Family-Friendly Company Status. The Ministry of Welfare of the Republic of Latvia assigns the status to 38 Latvian enterprises that adhere, in their daily activities, to the principles underpinning family-friendly enterprise and meet a set of criteria and indicators established by the Sustainability Index. The Family-Friendly Company Status is awarded to businesses that promote family-friendly policies both at the organisational and the community level, for instance, while providing services and creating a healthy  workplace environment. Within the framework of the Sustainability Index, the Family-Friendly Company Status is awarded to businesses that demonstrate their professionalism, experience and values to the public and that can lead by example. “We have received the Family-Friendly Company Status in recognition of years of efforts directed towards reinforcing of family values and providing aid and support to different population groups. As succession is one of Bank’s corporate values, we therefore strongly promote family engagement and care about future generations. Baltic International Bank receives the Family-Friendly Company Status already for the third time in a row. It is certainly a proud moment for us. Moreover, the award reflects Bank’s commitment to pursuing and implementing family-friendly employment policies and practices. We take care of our employees, foster a supportive workplace environment and provide opportunities for developing and integrating young talented people. We always remain responsive to the needs of society as a whole. I would like to congratulate this year’s awardees and their teams whose passion and dedication is really inspiring,” our Management Board member Guntars Reidzāns emphasises. Since its foundation, Bank has always striven to shape culture that supports children and families, both at the organisational and the community level. As Bank is a responsible employer, it promotes and encourages a motivating workplace environment. Through its family-friendly policies, Bank helps the employees to achieve a healthy and productive work-life balance. Bank also organises special events for the families and children of its employees. Every year, Bank celebrates the International Day for Protection of Children and organises the Children’s drawing festival whose main theme is “Coin”. This is a fun and festive event for the whole family. To facilitate professional development of tertiary-level students, Bank offers them to attend banking internship, an opportunity to see Bank’s work from the inside, apply their theoretical knowledge in practice, and embark on a career in the finance industry. “We are very pleased to know about the ever-growing interest in receiving the Family-Friendly Company Status. This signifies that enterprises are committed to greater corporate social responsibility (CSR) and that they are cultivating their ability to think long-term. Thus, they promote maximally favourable conditions for their employees, creation of customised products, and development of society as a whole. The Family-Friendly Company Status has become a matter of prestige as it boosts brand awareness and reputation of the respective business as an employer, also internationally,” Guntars Reidzāns says. Bank actively takes part in different charity events. In particular, Bank donates annually to support orphanages (boarding schools). During the charity donation campaign, Bank’s employees buy footwear, apparel, toys & games, sporting equipment, and other stuff beneficial for children. The employees donate computers to Latvian schools and participate in various fundraising initiatives (gathering voluntary financial contributions) to provide support to the children and families who are in need. In 2018, Bank launched an ambitious initiative, i.e. the reading promotion project titled “Library”. The project focuses on meaningful engagement of young people and aims at educating the public regarding the importance of literature in people’s lives. About the Status of Family-Friendly Company To instil family values in the society and to build a family-friendly work and life environment, the Ministry of Welfare annually evaluates businesses and assigns the Status of Family-Friendly Company. This year, the status has been assigned for the eleventh consecutive time for the purpose of popularizing the very idea of a family-friendly businesses and involving more and more new enterprises into the process. In close liaison with the Sustainability Index, the businesses have been developing (since 2011) the criteria relevant to promoting the family-friendly policies. The criteria are included into the survey sheet of the Sustainability Index. To qualify for the status, the enterprises must meet the eligibility requirements. To put it more precisely, they must reach the 75-percent minimum threshold. It is notable that certain businesses do not qualify for the status. We mean enterprises whose activities or goods are somehow unfriendly to children and families, such as manufactured tobacco, alcohol and alcoholic beverages, arms production, and gambling services.

Trends of the Baltic investment market: real property, business success stories and capital market development

At present, society has record-breaking savings, and modern technologies facilitate access to financial instruments turning investment opportunities into a pressing daily problem. The rate of return on investment in the world is low, so the Baltic countries can become an attractive and promising alternative for investors in several asset classes. In addition, the market now has a unique opportunity to combine traditional investments, such as investments in real property or manufacturing, with the potential and speed of new technologies adapting to the maximum the investment proposal to the needs of a modern man. In general, both institutional investors and well-off private individuals and family-owned private investment companies highly value the Baltic region as a good place to invest in new bonds, stocks and alternative investments. The demand and interest of investors is high, and the time has come to look for new investment opportunities. Real property as a classic investment value Many investors are now returning to basic values ​​that are becoming relevant again. Of course, real property objects are a classic value and asset in the investment market, but foreign investors often look for large-scale investment projects in the field of real property that, for obvious reasons (the size of the territory and population), the Baltic states cannot always provide. The Baltic States are a very attractive market, but the size of their territory sets certain limits on attracting investment in the field of real property. There is a limited amount and need for large shopping centres or huge office complexes. Of course, investors want to invest in transactions amounting to EUR 100 million, and the offer of real property projects of this scale in the Baltic States is rather limited since the average real property transaction ranges from 3 to 5 million euro. However, there are also transactions worth between 20 and 50 million euro and in the current investment climate where the total return on investment is low the Baltic real property market will continue to attract foreign investors by offering investment grade products and higher returns than those in Western Europe or Scandinavia. It is also expected that return on investment in the field of real property will also remain stable. At the moment, there are many attractive medium-sized investment projects in the Baltic market, such as high-end office and office building rentals, and over the last three to four years the total activity in the Baltic market has exceeded one billion euro which is an extremely good achievement for such a small market. The interest is great, and deals are made. In Lithuania, activity is ensured by many new buildings in Vilnius, especially in the office space segment which is currently on the rise, but the rest of the Baltic states are not far behind. For instance, the apartment, private house and commercial real property segments in Latvia show a growing and positive trend. This fact continues to attract the attention of both local and foreign investors. The highest profitability is observed in the logistics and industry sectors, but this segment is not risk free, especially in Vilnius and Riga where large logistics buildings depend on the activity of major lessees since after a lessee leaves the building it is often difficult to find another similar major lessee. Of course, the return on investment here is attractive, but higher risks should be taken into account; investors are different and a certain proportion of them choose nothing but high-risk investments with higher returns. In general, the volume of investments in real property deserves attention in terms of offering attractive and versatile real property tools in the Baltic region market. Local businesses, success stories and contributions to the Latvian economy Foreign investors do not have their eye toward real property only; they are also interested in local businesses – profitable companies with good cash flow and, yes, with a great, attractive history. One of these successful domestic examples, of course, is the natural cosmetics manufacturer Madara Cosmetics whose owners created the company from scratch and currently have a market value of about EUR 30 million. At the end of 2017, the Company decided to raise additional funds and became a public company listed on the Nasdaq Riga stock exchange. Investors like local success stories because Madara Cosmetics began with the four founders of the Company, and over time the number of its shareholders grew to 800 people. In addition, we should not underestimate small investors since private funds in general are rapidly growing, and wealthy individuals are looking for opportunities to invest them choosing the best offers. I believe that this trend and the desire for alternative investment opportunities will continue to grow in all markets of the Baltic region. Development of Baltic capital markets and the value-added principle for investments The development of the Baltic capital market is largely due to the privatization of state-owned companies which increases the demand for private financial instruments on the part of private investors. International investors want to invest in the Baltic market when they see significant profit potential as well as opportunities for cooperation with local investment banks. It should be understood that the market of the Baltic region is a new market where many investment traditions have not yet taken root as in Western Europe. The capital market is developing rapidly, for instance, the role of bonds in the Baltic economy is increasing. Baltic International Bank also offers clients to buy and issue bonds. The Baltic bond market offers good investment opportunities, and the number of transactions in the Baltic markets shows healthy growth. Bond sales are growing in both the official NASDAQ list and the second list. In addition, with the development of crowdfunding platforms small investors are becoming more active. Currently, the market in our region offers many attractive investment opportunities since foreign investments are attracted by both the banking industry and traditional industries – agriculture, the dairy sector, forestry bearing in mind the sector of services that the Baltic States offer in high quality. This is a time of opportunity in all categories of assets. At the same time, high profitability can be achieved by contributing added value to economic development, GDP growth, job creation and the development of society as a whole. Baltic International Bank evaluates investment proposals carefully choosing investment projects in large and growing sectors with a clearly defined initial strategy. Our goal is to find the most suitable solutions for each customer conducting in-depth research rather than giving preference to standard projects. We see particular potential in the renewable energy sector and are focused on finding new investment opportunities in global markets. Currently, the opportunity to invest in the Baltic wind energy sector is very relevant since Latvia, as an EU member state, has set a goal to increase the utilization rate of renewable energy sources from 36% to 45% by 2030. Technological developments have significantly reduced the cost of wind energy generation. This makes it possible to generate wind energy which can be sold at a market price without additional government subsidies turning into profitable investments. The goal of increasing the share of renewable energy and technological development offers great opportunities for investors and our customers. In general, we invest in a prosperous, progressive business sector with future potential, added value and contribution to the national economy. Opinion article published in, 8 June 2019

The performance results of Baltic International Bank continue to demonstrate a positive trend

In 1Q 2019, the Bank has substantially improved its performance results, compared to 1Q 2018. While continuing to implement its new business model, the Bank achieved a 64.9-percent rise in the net fee and commission income, compared to 1Q 2018. In 1Q 2019, the total customer funds reached EUR 508 million, and the assets under management grew by 23% to reach EUR 91.23 million. The value of financial instruments in brokerage service was EUR 168 million. “The Bank’s new business model implies an emphasis on fee and commission income that comprises customer service fee, brokerage fee and custody fee (for safekeeping securities). The model also envisages concentration on high value-added services. In 2018, we succeeded to hit a record as the fee and commission income totalled circa EUR 10 million. One more challenge that we are facing while switching over to the new business model is to boost business   efficiency while taking into account all costs. The results are indicative of that the Bank posts profit.  The Bank has made a huge stride as the total customer funds have reached half a billion euro. This figure is quite impressive. Why is this important? Once we have clients who deal with such a huge volume of resources, we can offer them high value-added services and hence increase our fee and commission income. I think it is important to keep a sharp eye on dynamic behaviours of client assets.  Currently they are showing growth patterns,” the Bank’s CEO Viktor Bolbat says. At the beginning of the year, Baltic International Bank invested in new digital solutions. The Bank continues to develop new digital tools and channels. The Bank is also working towards improving its Internet Banking facility. Committed to providing convenience to its clients, the Bank will offer new functionality, security enhancements and a wider array of improved services. The new Internet Banking will serve as a platform for developing new products and services in the future. As part of the new Internet Banking project, the Bank offers its sandbox solution for Open Banking. In March 2019, Bank rolled out Application Programming Interface (API). Open Banking is an open banking platform for cooperation with financial technology companies and other partners. Sandbox is a safe isolated environment where third-party service providers are able to test their ideas and innovations in the financial sector in general and in asset management in particular. In 1Q 2019, the Bank opened the “Investment Opportunity” platform where its current and potential clients can use an interactive calculator to choose the most suitable investment portfolio. In 1Q 2019, the Bank has substantially improved its performance results, compared to 1Q 2018. While continuing to implement its new business model, the Bank achieved a 64.9-percent rise in the net fee and commission income, compared to 1Q 2018. In 1Q 2019, the total customer funds reached EUR 508 million, and the assets under management grew by 23% to attain the level of EUR 91.23 million (EUR 91.23 million). The value of financial instruments in brokerage service was EUR 168 million (EUR 168 million). The loss incurred in the reporting period is associated with setting aside allowances for doubtful debts, including also indebtedness. In this case, the allowances are set aside concurrently with trimming the number of clients posing high risk. In 1Q 2019, the operating income increased by 30% (35%) on a year-over-year basis and totalled EUR 3.34 million (EUR 3.50 million). The net fee and commission income surged up to 59.0% (56.4%). The net interest income totalled 19.8% (18.9%). Administrative expenses reached EUR 2.67 million (EUR 2.70 million). The Bank’s high-quality liquid assets (assets carrying investment-grade credit rating and balances due from the Bank of Latvia) totalled EUR 169.41 million (EUR 169.41 million) or 58% (58%) of the total assets. Investments in government bonds totalled EUR 21 million (21 million) or 7.2% (7.2%) of the total assets. The Bank maintains a well-diversified structure of liquid assets represented by bonds (12 percent), due from credit institutions (7 percent), due from the Bank of Latvia (80 percent) and cash (1 percent). The liquidity coverage ratio (LCR) was 226 percent. The net stable funding ratio (NSFR), characterizing the availability of a stable funding profile in relation to the composition of assets and off-balance sheet activities, reached 158 percent (158 percent). As of 31 March 2019, the Bank’s own funds totalled EUR 23.59 million (EUR 23.44 million). The Bank’s Tier I capital ratio (CETI) was 9.46% (9.41%). The total SREP ratio (TSCR ratio) reached 13.36% (13.32%). At the beginning of this year, several external stakeholders evaluated the Bank’s efforts. The Ministry of Finance and the Latvian tax authority [VID] have admitted Baltic International Bank to the Gold Level of the In-depth Cooperation Programme (aka White List) administered by the VID, in recognition of transparency of the Bank’s operations and fiscal discipline.  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. In 1Q 2019, the Bank continued to support Latvian literature and to implement a project titled “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 involves Latvian literati and other active shapers of the literary life in Latvia. The Bank’s (Group’s) key financial indicators:    To view the Bank’s financial statements for 1Q 2109, please click here.

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) 

Responsible thinking becomes a building block for competitiveness - Viktor Bolbat

Sustainability issues are becoming more and more pressing and they receive greater attention from politicians. Viktors Bolbats, Chairman of the Board of Baltic International Bank, tells about the future challenges and the introduction of the ESG approach. This year's trends at European level, such as the idea of British politicians to exclude from London Stock Exchange companies who don't care about climate issues Two major political events have marked this year’s spring. In April 2019, the European Banking Authority and the European Banking Federation emphasised the willingness of EU supervisors, regulators and banks to move forward on the various challenges related to sustainable finance and engage in a structured dialogue for incorporating sustainability into EU banks' frameworks and risk management. Great Britain’s and Ireland’s parliaments decided to stick to climate change commitment. In May, MPs passed the largely symbolic motion to declare a climate emergency. The step followed a series of street protests by the Extinction Rebellion environmental campaign group.  This notable novelty reflects a change in mind-sets. We stand away from pursuing only our self-interest in terms of comfort, safety and wellbeing. We have gradually shaped our ability to think ahead, about the world our children and grandchildren will inherit tomorrow and the quality of their life. Businesses, including those in Latvia, transformed their mind-sets to see and do things differently. Views of Latvian society on sustainability issues What are the main environmental and sustainability issues included on the agenda of Latvian society? According to Baltic International Bank Latvian Barometer[4] (a monthly survey of public opinions and attitudes in Latvia), the key priorities include waste sorting (75% respondents), refusal to use plastic bags (46%), recycling and reuse of package and other materials (43%), and choices to walk or cycle more / to favour collective or public transport rather than use of personal cars (42%). The survey shows that people regularly and daily practise those activities. However, the number of the respondents is well lower because awareness of environmental and sustainability has grown while practical measures are insufficient overall. This statistics is indicative of that people actually need an extra boost or spur. Employers could undertake such roles and become setters of the good example. It sounds so reasonable, doesn’t it? Responsible action of a business gives a fillip to the employees, then to its clients, and thereafter to the families of the employees and to the people related to the clients. I strongly believe that businesses can achieve a better scale effect that normally is required to get a new idea to take root in the society or to catalyse action. Baltic International Bank experience Incorporating sustainability model Enviroment. Social. Governance. In 2017, we decided to base our further development on an internationally proven ESG approach (ESG is an approach that aims to incorporate environmental, social and governance factors). It was immediately clear that the transition would considerably change Bank’s day-to-day business. Be it making strategic decisions on Management Board-level or holding talks with our client on potential involvement of Bank in an investment project, we now view all of those aspects through the prism of environmental sustainability, social responsibility and good governance. The three main pillars on which our organisational business model rests gradually change the worldview of our employees, clients and partners. For this reason, involvement of businesses in raising awareness on sustainability issues is so important because businesses exert impact on the public agenda and pinpoint issues of concern. One year and a half after Bank has embarked on incorporating ESG considerations in its daily activities, I can say that we have set quite an ambitious goal, far from being confined to a mere formulation of messages and strategies, as it may seem to an outside watcher. For organisation, this implies implementation of specific steps and actions, including  employee training, raising awareness of clients on ESG approach, defining measurable goals and objectives of environmental protection (CO2 emissions, energy and water consumption, waste management, and others), promoting and upholding the principles of good governance, and everyday organisation-level integration of social issues. Further, we analyse those aspects with respect to our partners and potential clients.  To what extent do they adhere to the values to which we are committed on a daily basis? From this point, we start talking with our colleagues and peers from other organisations. The new mind-set already manifests itself explicitly, rather than ‘’I’m not interested in his viewpoints, they pay, that’s good... “. I intend to cooperate with you, therefore let me tell you why sustainable attitudes and behaviours are of paramount importance for me. The bottom line therefore is as follows: “Make today decisions that will not make you feel ashamed tomorrow.” I am not a convinced supporter of drastic initiatives proposed by some British politicians who weigh up delisting of firms from the London Stock Exchange if they fail to tackle climate change. However, it is imperative to raise awareness on sustainable attitudes and behaviours, including in business environment where people make long-term investment decisions. In the light of the fact that our ability to assume responsibility affects the future of ourselves and of our children, I firmly believe that a “component of responsibility” will become one of the building blocks for competitiveness among businesses.  Getting prepared timely is worth the effort.

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 Implements Open Banking and Sandbox

According to a revised Payment Services Directive (known as PSD2) adopted by the European Parliament, Baltic International Bank offers its API sandbox solution for Open Banking. Open Banking is an open banking platform for cooperation with financial technology companies and other partners. API Sandbox is a safe isolated environment where third-party service providers are able to test their ideas and innovations in the financial sector in general and in asset management in particular. The solution is suitable for large companies and independent developers, especially for those interested in new digital products, services and innovations. “As an integral part of our new Internet Banking project, Open Banking will serve as a platform for developing new products and services in the future. We will roll out the new Internet Banking facility at the end of summer 2019. It will offer the users new functionality, security enhancements and a wider array of services. Some of the major challenges facing the financial services enterprises today include moving towards modern digital opportunities and implementing appropriate solutions”, Head of Digital Channel Development Jānis Osis explains. “Baltic International Bank not only goes hand in hand with the newest trends in the banking industry, but even stays ahead of the trends by implementing new technologies and digital solutions that allow boost the value of the services,” J.Osis emphasizes. Bank is offering its API sandbox solution whereby two Application Programming Interfaces (APIs) are available in accordance with the second Payment Services Directive, or PSD2. API is a software intermediary that allows two applications to interact with each other both within and between organisations and share data with each other. The API sandbox solution implemented by Bank enables new players, both payment initiation service (PIS) providers and account information service (AIS) providers, to penetrate the market. Go to Open Banking   About Payment Services Directive (PSD2) The revised Payment Service Directive (PSD2) became applicable on 13 January 2018. The Republic of Latvia transposed the PSD2 into national law, namely, into the Payment Services and Electronic Money Act Maksājumu pakalpojumu un elektroniskās naudas likums] PSD2. The PSD2 opened up an opportunity to develop open banking models, thus helping clients to better monitor their payments and account information. It also fosters competitive rivalry on financial markets overall.

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 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.

Baltic International Bank has been Admitted to the Gold Level of the White List Maintained by the SRS and the MF

The Ministry of Finance (MF) and the State Revenue Service (SRS) have admitted Baltic International Bank to the Gold Level of the In-depth Cooperation Programme (Padziļinātās sadarbības programma) or so-called SRS White List, thereby acknowledging the transparency of operations as well as tax compliance discipline. The In-depth Cooperation Programme of the State Revenue Service has been improved this year to promote a closer and more efficient cooperation with responsible taxpayers. ‘Baltic International Bank is committed to responsible and transparent business conduct. In our work, we rely on the ESG (Environmental. Social. Governance) approach, where Governance (corporate management) is one of the main blocks. Baltic International Bank pays special attention to the principles of corporate governance, ensuring compliance with Latvian and international legal norms and timely payment of national taxes. Therefore, we welcome the Gold status granted by the MF and the SRS, which was awarded by evaluating the Bank's economic performance, the amount of taxes paid and a number of other criteria’, says Alon Nodelman, Member of the Management Board and Chief Financial Officer of Baltic International Bank. The sustainability and corporate responsibility of Baltic International Bank is evidenced by the gold award from the Sustainability Index received by the Bank for the second year in a row. The information published by the SRS shows that the In-depth Cooperation Programme or the White List is designed to promote a closer and more efficient cooperation with responsible taxpayers. Since 1 January 2019, participants of the In-depth Cooperation Programme are admitted to one of three levels: Gold, Silver and Bronze, depending on the volume of business. All companies are assessed on the basis of 15 key criteria to qualify for participation in the programme. Additional criteria apply to grouping, and they are different for each level. The Gold level currently comprises 79 companies. More information on the SRS website, in the section Padziļinātās sadarbības programma (In-depth Cooperation Programme).

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