Commercial banks still have the largest segment in Latvia’s finance and capital market – 84% of the sector’s assets, according to data from Finance and Capital Market Commission.
According to FCMC report from 2017, as a result of changes in the finance sector, the volume of foreign clients’ deposits in Latvian banks declined 30% in 2016 and 2017. This means approximately EUR 4 billion of risky finances has left Latvia’s financial sector. Domestic deposits were dominant in Latvia’s banks at the end of 2017. At the same time, the foreign client deposit volume declined to 39%. The quality of Latvian banks’ credit portfolio continued improving last year. Domestic deposits also demonstrated good growth, compensating for the reduction of foreign deposits.
“By adopting new rules, Latvia’s banking sector narrowed in 2017. This had an effect on its profit indexes. Nevertheless, Latvia’s banks managed to preserve high capitalization and liquidity levels. This means FCMC’s previously requested increased bank stability indexes, which includes foreign segment banks, proved their worth as good tools in this period of change,” says FCMC chairman Peters Putnins.
He adds that there aren’t many countries whose banks would be able to ensure billions of dirty money leaves the sector in such a peaceful and controlled manner. In 2017 Latvia reached the lowest point for foreign deposits in the past twenty years. This helped free the country and its banks from a risk to their reputation.
“As geopolitical and security accents change in the world, the sieve Latvian banks will have to go through becomes all the more refined. Mistakes of the past have had a major echo this year. This is why the exit of certain client categories from Latvia’s banking sector will remain a major objective for next year, as well. After this transformation, the two previously separate groups of Latvian banks will become one, and there will no longer be any specific foreign client banks in Latvia,” Putnins continues.
FCMC’s report for 2017 also mentions that the year was notable because of the cooperation between the commission and US Department of Treasury’s Financial Crimes Enforcement Network in investigating five Latvian banks for non-compliance with regulations. Uncovered breaches were indirect. All investigated banks admitted their problems and cooperated with investigators. Nevertheless, those banks were fined a total amount of EUR 3.5 million. (BNN/Business World Magazine)
