Local capital banks are ready to invest EUR 220 million in the Latvian economy
Changes in the Latvian banking industry, the increased attention to it from international organisations, and the challenges of the time required Latvian banks to seriously restructure development models and search for the new ones. In a short time, these tasks were successfully completed by the small mobile banks with local capital that managed to find their niche in the financial market and prove to be necessary for the Latvian economy.
As a co-chair of the Strategic Development Committee of the Finance Latvia Association, I would like to emphasise that lending and investing in Latvian business is becoming a priority for local capital banks. Knowing and understanding the local business environment allows them to be closely connected with national economies. Such banks are predictable, the names of their shareholders are known to the public, they are actively involved in the public life of Latvia and are interested in maintaining its stability in the long term.
In 2020, three local capital banks – Baltic International Bank, BlueOrange Bank and Signet Bank – are ready to provide EUR 220 million in the form of loan funds for the development of the Latvian economy. This figure grows with every passing year. In 2018, said banks issued loans to local companies in the amount of EUR 61 million, while for 2019, the amount expected according to forecasts is EUR 170 million.
If the cooperation of our three banks turns out to be successful, we will form a single platform for lending to local businesses. Apart from that, financing can be attracted through other investors or other forms, for instance, the issue of securities.
Unlike major banks which have large flows of customers and do not always manage to serve all of them in more depth, we have the opportunity to work with each entrepreneur individually and delve into their problems. These are ambitious people, the engine of our economy, they need to be supported. Who will do that but us?
About new priorities
Since 2016, Baltic International Bank has been making comprehensive and profound changes in the management structure, customer service and internal control system. And now we work keeping the new priorities in mind.
Let me quote some figures. As of October 2019, the assets of Baltic International Bank amounted to EUR 300 million, while the total amount of customer funds managed by the Bank on the balance sheet or in the form of securities and assets under management was almost half a billion euro.
The number of local customers grows every month. Now they make up 38%. 37% are citizens of the EU and the European Economic Area, and 25% are citizens of other countries. The demand of local customers for account maintenance and loans is also growing. I think this growth will continue next year.We plan to strengthen all the teams responsible for providing financial services to Latvian customers and those of the euro area market. Being in a single European banking union, we use the experience gained in servicing international customers in order to work with the euro area residents.
Baltic International Bank has extensive experience in international business. Today, in many Latvian companies there is an international owner, an international tenant of a building, an international client. And here our competence can help to figure out which financing instrument to use, what kind of consultation is needed. We will help the customer save both time and money.
We also help in financing projects of Latvian businessmen abroad where special competency is needed; we will give a tip as to how to get a guarantee, how to protect your investment in a particular country. Now, we are developing cooperation with the development finance institution Altum. They give to Latvian entrepreneurs guarantees which reduce banking risks.
Environmentally friendly projects
The volume of lending always depends on three things – the availability of actual capital, the amount of the capital requested by the regulator, and the strategic decision of the bank itself. Every bank decides what kind of company it is ready to support: whether it will finance a company operating in a neighbouring country or will develop a Latvian company with foreign capital; whether it considers our real property market stable and so on. Every bank has its own priority scale.
The goal of Baltic International Bank is to be a bank that, together with customers, invests in environmentally friendly and long-term projects aimed at a sustainable future. The Bank’s development strategy has been developed until 2030 and provides for a whole range of measures necessary to meet this goal.
In 2017, we began to implement the globally recognised ESG approach. It was chosen as a model that meets our beliefs and “packs” the Bank’s development strategy into an understandable and logical structure.
The essence of the ESG approach
The term ESG means Environmental, Social, Governance (environment, social responsibility, and corporate governance). This is the approach that defines the appropriate model of social behaviour. It stands on three pillars.
1. Environmental impact. This means taking care of reducing greenhouse gas emissions, saving natural resources, reducing carbon dioxide emissions, and using renewable energy. In this area, our Bank, together with customers, implements investment projects associated with improving energy efficiency, production and use of renewable energy. Through the Bank, customers have the opportunity to receive income from capital gains and, simultaneously, to improve the environment.
2. Social responsibility provides for the care of employment, human rights, health and personal safety, and the protection of various social groups. Baltic International Bank actively participates in the country’s public life, contributes to the creation of new jobs both by providing financing to companies and through its own development. Throughout its history, the Bank has supported the preservation and transfer of artistic and cultural values to future generations. Significant projects include publishing books, participating in the Annual Latvian Literature Award (LALIGABA), creating a mobile application for the National Museum of Art, and many others.
3. Reliable corporate governance includes taking care of the effectiveness of this management, of an impeccable reputation, and prevention of the corruption risk. Baltic International Bank pays particular attention to open communication with customers, partners, employees, compliance with international and Latvian laws, as well as ethical standards.
All three things – ecology, social responsibility and corporate governance – are closely related. A well-designed control system can ensure that many conditions are met.
As a business organisation, we have assets worth EUR 300 million, provide 219 jobs in different buildings that use electricity, heat, consume water, paper, produce garbage, etc. A socially responsible employer should think about all that, as well as about the projects that he or she supports.
The Bank has many faces
If, in former times, profitability was the only thing in the mind of a business, and, for instance, energy saving remained for many companies in the good to have category, the role of business has now expanded much. Think, for instance, of the green bonds of Latvenergo, or an ESG strategy for banks. It got to the point that the European Banking Authority (EBA) supervising European banks said that a long-term, responsible approach would be introduced into the regulations. So, our choice is a farsighted decision. The banking industry will be the one where such an approach is a must have.
Our customers are citizens of the world, whether they are residents of Latvia or other countries. Responsibility for resources is equally important to all of them. I believe the principles of ESG are close and understandable to everyone.
To not be ashamed tomorrow
Implementation of the ESG approach in the daily work of the Bank is a very ambitious goal and requires a lot of effort from us. This implies a change in thinking, habits of all employees of the Bank – from the chairman of the Management Board to the cleaner. I understand that I have a great responsibility because the whole team looks at me. Therefore, I learn daily myself and am ready to help others.
I formulated a new approach for myself as follows: so that tomorrow there would be no shame for the decisions that are made today. If more and more business organisations adhered to this principle, then one could count on qualitative changes in society.
The answer to the question “what needs to be done to change” is one – to learn, make mistakes, correct mistakes and learn again. You cannot become specialists in a new approach in a month or even a year, but you can constantly go forward. Our team is not afraid to experiment; we look at the reaction of people which allows us to adjust our actions and specify goals.
And there are three things to consider. Firstly, you must understand that the decisions you make today should work for the future. Secondly, you need to clearly understand what it means exactly in your work, for your customers, for your employees. This question is far from being obvious; it takes time to understand how you will implement the decision you made in real life. And, finally, it is necessary to start delivering on promises.
I want to emphasise that we are not doing this for self-promotion; this is our position. The Bank is a public organisation, and it is important for us that society knows our point of view.
Our "child" – the ESG model – has been maturing for three years. We made the decision just in time. Now, evaluating global trends, we see how our chosen strategy fits into them. Responsibility and transparency are, in fact, the main requirements of international organisations for the banking industry. We started thinking about these things a few years ago and were proactive. It was clear that banks can only develop along the path of responsible business.
Banking business is one of the oldest types of entrepreneurship; people started lending and borrowing money a very long time ago. And this business has always been based on trust. Not only do we want openness and transparency from customers and partners, but customers and partners expect the same from the Bank. It is always a two-way road. This is the approach provided by ESG.
Not a single bank exists on its own; all the banks in the world are parts of an ecosystem. Yes, each financier, investor, customer may have his or her own position, own capabilities, vision of the business, but each should have his or her own long-term approach. Most of our partners have it, especially those from large countries. The ESG strategy is one of the most popular strategies in the USA and Europe.
Platinum as a symbol of endurance
ESG touches on all aspects of the Bank’s activities: those that seem obvious – management, lending, investments, services, and those more subtle ones – human resources, IT, and participation in public life.
Baltic International Bank supports many public projects. I will give an example of the "Library" project which popularises the books of Latvian writers through social networks. I was very pleased it was supported by other banks without even being aware that it was our project. And the way it developed proves the importance of our initiative.
We also support the publication of books by local authors. The project that we started in 2018 and which we plan to complete in 2020 is the publication of the unique book “Family Coats of Arms in Contemporary Latvia”. Alongside, we work on the organisation of the exhibition together with the Ministry of Culture.
Baltic International Bank is located in Old Riga; here, we own several buildings of cultural and historical significance. Reconstruction is currently underway in the quarter between Kalēju and Vecpilsētas streets. In old houses, we strive to preserve the spirit and style of former times. At the same time, modern workplaces, environmentally friendly conditions will appear here as the latest technologies are used in the reconstruction. Keeping the unique look of Old Riga, we create a modern and comfortable environment in it.
This year we were the first of the Latvian banks to receive the highest platinum category of the Sustainability Index. It is assigned by the Institute of Corporate Responsibility and Sustainability which, according to the world-recognised methodology, helps Latvian companies assess their level of responsibility. Baltic International Bank has been undergoing such an audit since 2014 and this year it received the highest rating. Given that platinum is very resistant to external influence, we regard this as a good symbol of resistance to difficulties.
Contribution to the future
Banking is a very sensitive area. Now, it is of utmost importance for all of us to show that we comply with modern conditions and the requirements of the time. And, of course, the reputation of the industry is very important. For me, ESG is our contribution to tomorrow, something to be proud of in the near future. We adopted ESG principles not as a project that can be started and completed, but as a constant forward movement that has become an integral part of our business.
Of course, each bank has its own history and its own choice. But in general, I think that ESG will become an “explosive topic” for Latvian banks, and sooner or later all financial and credit institutions will begin to move in this direction. By our decision we moved with the times and requirements thereof. I am convinced that our path will become a model for others.
We specified the year 2030 as the time when we will have achieved the goal. By this time, we should become a bank that takes full advantage of the possibilities of responsible investment for customers and participates in them. We will not only offer customers environmentally-friendly and investment-friendly facilities, but we will also invest in long-term projects that help Latvia and the Latvian economy to grow and develop.