Banking association calls for insolvency procedure changes

The creditor should have the right to choose the administrator of an insolvency procedure, Mārtiņš Bičevskis, head of the Commercial Banking Association, told Latvian Radio Tuesday.

He claimed that often there are unacceptable arrangements between the parties involved in insolvency procedures prior to the actual process taking place.

He argued that a creditor should have the right to pick qualified and reputable individuals to manage the procedure.

"As the field has huge problems with reputation, the solution is to overhaul the system," said Bičevskis.

He called for not only allowing creditors to pick the administrator but also for re-certifying all insolvency administrators.

In early June Justice Minister Dzintars Rasnačs (National Alliance), appearing on Latvian Television's Tiešā Runa said that insolvency administrators have managed to circumvent the system in which insolvency administrators are assigned randomly. They do so by ceding cases to their colleagues using a loophole in the law.

Reform is ongoing in the Justice Ministry to work out a ratings system of the administrators and reducing the number of officials administering insolvency procedures from 324 to 100, according to Rasnačs..

While Girts Greiskalns, executive director of the Foreign Investors Council in Latvia, said on June 3 that the insolvency sector in Latvia is little better than an organized crime racket due to the lack of supervision in insolvency procedures.

According to a study by the Foreign Investors Council in Latvia and the auditing firm Deloitte, malicious insolvency processes and the overall abuse of insolvency has led to the Latvian economy losing €665 million between 2008 and 2014, and this number could increase to €852 million in the next ten years.

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