The Saeima1 has adopted and
the President has proclaimed the following law:
Law on Development Finance
Section 1. Purpose of this Law
(1) The purpose of this Law is to ensure effective operation
of the Development Finance Institution (hereinafter - the Finance
Institution) in implementing aid and development programmes and
also ensuring the performance of other delegated public
administration tasks that are specified in laws and regulations,
implementing the State policy in the field of national
(2) Within the meaning of this Law, aid and development
programme is a programme that is fully or partially implemented
in the form of financial instruments or grants and is financed
according to the provisions laid down in Section 13 of this Law
(hereinafter - the programme). Financial instruments are loans,
guarantees, export credits, export credit guarantees and
financing of export insurance, holding in the capital of
commercial companies, investments in funds, including in
alternative investment funds and also other financial instruments
specified in laws and regulations.
Section 2. Scope of Application of
(1) This Law prescribes the organisational structure,
administration and financial management of the Finance
Institution, the procedures for the development, approval,
implementation and monitoring of programmes thereof and also
activities in the performance of other delegated public
administration tasks specified in laws and regulations.
(2) The Finance Institution shall implement programmes in the
following fields and for the following purposes:
1) development of small and medium-sized economic operators
and also commencement of commercial activities;
3) construction, reconstruction and renovation of residential
4) development of State and local government
5) environmental protection;
6) development of business infrastructure;
7) technological development and innovation;
8) formation of venture capital;
9) development of agriculture, processing of agricultural
products, rural areas, fishery and forestry;
10) promotion of the employment of socially sensitive
population groups and implementation of other social aid
11) promotion of co-operation;
12) aid to region requiring special support;
13) promotion of export;
14) implementation and co-funding of the European Union
programmes and projects;
15) implementation and co-funding of the programmes and
projects of international finance institutions and also in other
fields of aid specified in laws and regulations and for other
purposes specified in laws and regulations.
Section 3. Legal Status and the
Holder of Stocks of the Finance Institution
(1) The Finance Institution is a capital company where all
voting stocks belong to the State.
(2) The Ministry of Finance holds 40 per cent, the Ministry of
Economics - 30 per cent and the Ministry of Agriculture - 30 per
cent of the stocks of the Finance Institution.
Section 4. Legal Framework for the
Activity of the Finance Institution
(1) The Law on Governance of Capital Shares of a Public Person
and Capital Companies and also the Commercial Law shall be
applied in matters not regulated by this Law.
(2) The Law on Control of Aid for Commercial Activity shall
also be applied to the aid programmes implemented by the Finance
Institution which are perceived as an aid for commercial activity
within the meaning of the Law on Control of Aid for Commercial
(3) The articles of association of the Finance Institution
shall be approved by the Cabinet.
(4) The stocks of the Finance Institution may not be pledged
or encumbered otherwise.
Organisational Structure of the Finance Institution
Section 5. Meeting of
(1) The meeting of stockholders has a quorum if all
representatives of the holders of stocks are participating
therein. One stock represents one vote.
(2) In addition to the information provided in the Law on
Governance of Capital Shares of a Public Person and Capital
Companies, the meeting of stockholders shall decide on the
1) the amount of reserve capital and policy for the
establishment of provisions;
2) the approval of the operational plan and budget;
3) the appointment and dismissal of the head of the internal
4) the determination of remuneration for the auditor and the
head of the internal audit service;
5) the approval of such transaction which is concluded by the
Finance Institution with the head of the internal audit
6) the approval of the operational plan, estimate of
expenditure and list of personnel of the internal audit
7) the approval of an internal control system;
8) the coverage of losses from the funds of reserve capital in
cases where the Finance Institution has incurred losses.
(3) In the cases referred to in Paragraph two, Clause 8 of
this Section, the meeting of stockholders shall be convened in
accordance with the procedures laid down in the Commercial
(4) The meeting of stockholders shall be chaired by the
representative of the holder of stocks - the Ministry of
(5) Minutes of the meeting of stockholders shall be signed by
all representatives of the holders of stocks who have
participated in the meeting of stockholders and by the rapporteur
of the meeting of stockholders.
Section 6. Composition and Period of
Operation of the Council
(1) The Finance Institution shall establish a council composed
of three members. Each holder of stocks has the right to nominate
one candidate for the position of a council member.
(2) Chairperson of the council shall be a member of the
council nominated by the Ministry of Finance.
(3) The term of office for the members of the council shall be
Section 7. Requirements for the
Members of the Council and the Board
The members of the council and of the board of the Finance
Institution shall be subject to the same requirements as are
provided in the Credit Institution Law for the members of the
council and of the board of a credit institution.
Section 8. Tasks of the Council
In addition to the provisions laid down in the Law on
Governance of Capital Shares of a Public Person and Capital
Companies, the council shall have the following tasks:
1) to ensure the development and approval of the operational
plan of the Finance Institution and to supervise its
2) to constantly supervise the operation of the internal
control system of the Finance Institution;
3) to asses and coordinate or reject the acquisition,
alienation and encumbering with property rights of an immovable
property if transactions with this property include recovery;
4) to perform the activities referred to in Section 14,
Paragraph four of this Law for the management of the financial
resources and risks s of the Finance Institution.
Section 9. Council Meeting and
Procedures for Convening the Meeting
(1) In addition to that provided for in the Law on Governance
of Capital Shares of a Public Person and Capital Companies and
the Commercial Law, the representative of the holders of stocks
shall have the right to convene council meetings, indicating the
necessity and purpose for the convening of the meeting.
(2) If the council does not have the quorum, the meeting of
stockholders is entitled to examine the matters to be discussed
at the council meeting.
Section 10. Composition and Period
of Operation of the Board
(1) The board may not have more than five members.
(2) A member of the board shall be elected for three
(3) Members of the board represent the Finance Institution
(4) The council shall appoint the chairperson of the board
from among the members of the board.
Section 11. Consent of a Meeting of
Stockholders to the Actions of the Board
The board requires a prior consent of the meeting of
stockholders to obtain or terminate, increase or decrease holding
or decisive influence in another capital company, to acquire or
alienate an enterprise and also to make investments in funds,
including in alternative investment funds. The activities
referred to in the first sentence of this Section shall be
implemented within the scope of programmes or delegated public
Operation of the Finance Institution
Section 12. Development, Approval,
Implementation and Monitoring of Programmes
(1) The sectoral ministry or the authority specified in laws
and regulations shall ensure the development of programmes and
monitoring of their implementation. A ministry or the authority
specified in laws and regulations shall develop programmes in
order to eliminate the identified market failures.
(2) The Cabinet shall establish the advisory council
(hereinafter - the advisory council) of the Finance Institution
for the development of programmes and monitoring of their
implementation and shall determine the agenda of the advisory
council, the activities to be performed for ensuring the
development of programmes and monitoring of their implementation
and also the authorities represented in the advisory council.
Representatives of associations, foundations and organisations of
economic operators are entitled to participate in the advisory
council as advisors.
(3) Before the approval of a programme by the Cabinet, the
Finance Institution shall assess the impact, risks and expected
losses, financial results and implementation costs of the
(4) The Cabinet shall approve programmes and determine
procedures for their implementation, funding, activity to be
supported and conditions for the eligibility of costs, including
funding for the coverage of the expenditures of the Finance
(5) The Finance Institution shall implement the approved
programmes in the fields specified in Section 2, Paragraph two of
this Law, including the provision of consultations for the
implementation of the approved programmes and provision of
effective communication and informative measures to the
corresponding target groups.
(6) The Finance Institution is entitled to attract other legal
subjects to co-operate in the implementation of the approved
programmes if the conditions of programmes so provide.
(7) The Finance Institution shall develop proposals for the
development and improvement of programmes.
(8) In accordance with the procedures laid down in laws and
regulations, the Finance Institution is entitled to participate
in the programmes financed by the European Union authorities and
the programmes financed within the framework of other foreign
Section 13. Financing of the
Approved Programmes and the Delegated Public Administration
(1) The implementation of the approved programmes and the
delegated public administration tasks shall be financed from the
State budget funds, including State-loans, the resources of the
European Union funds and other foreign financial aid, and also
other sources of funding in accordance with the procedures laid
down in laws and regulations.
(2) To finance the approved programme, the Finance Institution
is entitled to attract financial resources from the financial and
capital markets and other sources.
(3) To finance the approved programme, the Finance Institution
is entitled to use its own funds.
(4) Implementation costs of the approved programme may be
covered from the revenue from the approved programmes, revenue
from the management of the assets of the Finance Institution,
from the State budget or the resources of the European Union
funds and of other foreign financial aid in compliance with
conditions of the approved programme.
Section 14. Management of Financial
Resources and Risk Management
(1) The Finance Institution shall manage financial resources
in accordance with a resource management strategy and a risk
(2) The Finance Institution shall assess the quality of its
assets and issued guarantees and establish provisions according
to the International Financial Reporting Standards, the
introduction of which is prescribed in Regulation (EC) No
1606/2002 of the European Parliament and the Council of 19 July
2002 on the application of international accounting
(3) The Finance Institution shall place its free assets in
financial instruments according to the resource management
strategy and risk management policy.
(4) In order to ensure appropriate financial resource
management and risk management, the council of the Finance
1) ensure the development and approval of a risk management
policy and shall monitor its implementation;
2) approve the risk management methods;
3) monitor the operation of a credit portfolio and other
credit risk assets and also the operation of a quality management
system for the issued guarantees;
4) approve the methodology for the establishment of
5) approve the procedures and methodology for risk
(5) The funds of the Finance Institution deposited in a credit
institution shall be considered as the property held by a credit
institution and belonging to a third party.
Section 15. Reserve Capital
(1) The Finance Institution shall build a reserve capital to
ensure financial stability and sustainable operation and also to
reduce the impact of risks of the approved programmes.
(2) The reserve capital shall include:
1) part of the amount (full or partial) of the expected losses
of the public funding received within the scope of the programme
which has been determined, taking into account the risk
management policy (hereinafter - the expected losses);
2) eligible expenses of the approved programmes reflected in
the liabilities of the Finance Institution;
3) the provisions referred to in Paragraph three, Clause 1 of
this Section and reversed for the financial reporting year;
4) the reduction referred to in Paragraph three, Clause 2 of
this Section if it is being allocated for mitigating the impact
of the risks of another aid programme according to the conditions
of the approved programme;
5) profit of the Finance Institution.
(3) Reserve capital shall be reduced by:
1) the provisions established in the financial reporting year
for a credit portfolio, assets of other credit risks or the
issued guarantees if the risk coverage for the public funding of
the programme has been completely or partially determined
according to the conditions of the approved programme, taking
into account the methodology of the Finance Institution for the
establishment of provisions;
2) excess of the expected losses over actual losses from the
established provisions and written-off credit portfolio or from
assets of other credit risks, or the guarantee compensations paid
after implementation of the approved programme;
3) the remaining part of the reserve capital attributed to
cover the expected losses of the approved programme if the
implementation of the approved programme is suspended;
4) the amount of increase in the equity capital of the Finance
Institution which has been allocated from the reserve
(4) Within the meaning of this Law, public funding is the
funding from the State budget, European Union funds, or other
foreign financial aid which is provided for the implementation of
the approved programme.
Section 16. Profit and Payment for
the Use of the State Capital
The profit of the Finance Institution shall be used in
accordance with Section 15, Paragraph two of this Law. The
Finance Institution shall not make any payments for the use of
the State capital.
Section 17. Liability for the
(1) The State shall be liable for the guarantees issued by the
Finance Institution in the amount specified in the law on the
State budget for the current year.
(2) The Cabinet shall determine the procedures by which the
State commitments for the guarantees issued by the Finance
Institution and also the scope of the commitments and granting
criteria shall be provided when developing a draft law on the
State budget for the current year.
Section 18. Preparation of the
Annual Financial Statement
(1) The Finance Institution shall prepare the annual financial
statement according to the requirements of the International
Financial Reporting Standards, the introduction of which is
prescribed in Regulation (EC) No 1606/2002 of the European
Parliament and the Council of 19 July 2002 on the application of
international accounting standards.
(2) Within a month after approval of the annual financial
statement, the Finance Institution shall publish on its website
the annual financial statement approved at the meeting of
stockholders or an abridged annual financial statement.
The Cabinet shall issue the regulations referred to in Section
12, Paragraph two and Section 17, Paragraph two of this Law by 1
The Law shall come into force on 1 March 2015.
The Law has been adopted by the Saeima on 30 October
President A. Bērziņš
Riga, 15 November 2014
1 The Parliament of the Republic of
Translation © 2020 Valsts valodas centrs (State