1. Leora Klapper World Bank Factoring Conference -- Warsaw October 23-24, 2003 Improving the Factoring Environment

2. Taxes  VAT taxes – Applied to pre-financing Lithuania (18%) Applied to service fees Lithuania, Latvia, Estonia, Slovenia (~18%)  Stamp taxes None  Factoring losses not treated as tax cost Poland

3. Regulation  Supervisory authority Lithuania, Latvia, Estonia, Hungary Bank supervisor  Cross-border factoring regulations Latvia and Lithuania  Factoring/ Corporate licenses Hungary: ~$4,000 US (5 months) Slovakia and Czech: ~$30 US (1 month)  Laws on initial capital requirements Yes: Slovenia, Latvia, Lithuania, Hungary No: Estonia, Poland, Czech, and Slovakia

4. Legal Code  Factoring act Lithuania, Latvia, Estonia, Slovenia  Secured lending laws permitting lenders to collateralize working capital assets (account receivables, inventory, etc.) A recording system to register liens on account receivables

5. Factoring Practices  Sources of financing: Bank loans (88%) Equity (44%) Retail deposits (17%) X Corporate bonds (0%)  With notification All countries!  With and without recourse

6. Factoring Practices  Sources of information on customers: Self-reported Parent bank or insurance co. Credit bureau Public: Czech, Lithuania, Slovenia, Slovakia Private: Poland  Sources of information on underlying account obligors: D&B Credit bureaus

7. Barriers to Growth Lack of understanding of the product; considered a “lender of last resort” Difficult to access credit information/ predict credit risk Slow legal recovery Lack of refinancing Non-assignment clauses (Poland) Unfavorable tax laws