Banks, Financial Services, Legislation, Lithuania, Loan

Vitas Vasiliauskas.

Stricter requirements will be applied to the second and subsequent loans granted to the same receiver, to loans granted to buy property in the non-European countries. According to the new document, the maximum ratio of the monthly repay of the loan and interest will not be higher than 40% of a person's disposable monthly income. Such requirement is higher than the several past years' Lithuanian average (23-28%), however, it is expected that such provision will not allow giving high-risk loans to residents and will reduce the number of insolvent debtors, reports LETA/ELTA.

Central bank's governor Vitas Vasiliauskas said that it was precisely this ration of 40% that sparked lengthy discussions with the commercial banks, yet, the international practice was the ground for making such decision. The maximum loan period will not exceed 40 years. The regulations also require the banks to introduce the clients with possible risks of borrowing more thoroughly.

According to Vasiliauskas, the regulations are oriented to the future to avoid making the same mistake again as the banks and their clients did prior to the crisis. "Having learnt the lessons of the crisis, many banks presently apply stricter conditions than those provided in the regulations. Responsible Lending should contribute to a sustainable and stable development of the finance sector and housing market, preventing the recent dramatic shocks. Sustainable development will be beneficial to all participants of the market, including the receivers of credits, the banks and real estate developers," the governor said. Responsible Lending Guidelines will be applied to all credit institutions operating in Lithuania: the banks of the country, branches of foreign banks and credit unions from November 1 of 2011.