It is not possible to create a “bubble” in lending in Latvia in the coming years, said Vice-Governor of the Bank of Latvia Santa Purgaile in an interview to Latvijas Radio.
“For the next couple of years, it is purely practically impossible to inflate this bubble,” said Purgaile, adding that it will not be possible to inflate the bubble regardless of the banks’ lending activity.
She also stressed that the Bank of Latvia will carefully monitor the situation to ensure banks issue sustainable and quality loans.
Purgaile also said that, personally, it would not be preferable to give banks an incentive to lend with a solidarity contribution. “I would not prefer to incentivise banks in this way to lend, to take on risky assets,” she said.
She also informed that the loan portfolio grew by less than 2% or more than EUR 250 million in the summer, which is a good indicator, because usually summer is not the most active period in the Latvian economy. There has been a significant increase in the number and volume of new loans, including particularly strong growth in the household segment.
“The summer months – June, July, August – marked an awakening, or a summery, vigorous period in lending, and this can certainly be attributed to the fact that the European Central Bank started a cycle of rate cuts,” said Purgaile.
As previously reported, the Ministry of Finance (FM) has prepared and submitted for coordination the Solidarity Contribution Law, which obliges credit institutions registered in Latvia and branches of credit institutions from other countries to pay a solidarity contribution for the next three years.
At the same time, the draft law also establishes a mechanism for applying a discount on solidarity contributions, which will provide a discount of up to 100% if a credit institution reaches a certain indicator of credit growth in a given period.
With solidarity contributions, it is planned to acquire EUR 96 million in the budget for 2025, EUR 60.8 million in 2026 and EUR 66 million in 2027.