The public statements from Latvian Saeima Budget and Finance Committee chairman Jānis Reirs ruin the reputation of Latvia’s financial system and the state itself, as representatives of Finance Latvia organisation claim.
[These representatives wished to remain anonymous. The association’s press-release was signed by its manager for communication Sabīne Spurķe – BNN].
The association objects to the opinion spoken by the politician in his 3rd October interview to LTV programme Rīta Panorāma about bank operations in Latvia. According to the association, what Reirs said said undermines not only the financial system’s reputation but also Latvia’s very image in the eyes of important decision-makers, which could potentially create a number of risks, including potentially negative effect on the country’s credit rating and Moneyval score.
The association invites politicians and officials responsible for the monetary policy to resolve issues related to the financial sector using work groups and find the best possible solution in accordance to the legal framework. Representatives of Finance Latvia say that the fuss around EURIBOR rate hike caused by decisions of the European Central Bank
“now dangerously borders populism”.
Proposals regarding state-defined mortgage loan interest payment’s reduction may have a cumulative effect on capital and liquidity effects both in the current lending cycle and in subsequent cycles, notes Finance Latvia.
According to the association, practices employed by different countries can be compared, but it should be done correctly – one cannot invoke the practices of different countries, regardless of whether they are in Eurozone or not, without looking at the legislative framework of each individual country and the situation as a whole. When it comes to deposit rates, however, banks have increased them multiple times. They did this in accordance with good bank management principles.
“The current push to deal with false statements accusing banks of money laundering in the context of an increase in the cost of a loan payment will not only fail to promote competition in the banking sector, it will raise legitimate investor concerns about the ability of politicians to understand the business specifics of different sectors and to take responsibility for how their public expressions affect the ability of companies to work in Latvia,” representatives of the association add.
In his interview to LTV, Reirs explained that mortgage interest – EURIBOR rates and interest rates applied by banks – payments could be subject to a 50% discount, as confirmed by LSM.lv.
“We want a limited term for this form of support. We will set a specific interest reduction for loans for a period of one year. After that we will assess the situation. There are multiple examples when interest rates went down. Our initial offer is a 50% cut,” said Reirs, adding that the reduction may yet change.
“We have reached a point when
we have a laughably low loan volume
– one-third of GDP, which is the lowest in the European Union. We have the highest rates, but almost no flexibility. We have the rights to support borrowers for a period of time,” said Reirs.
When asked about potential complaints from credit institutions about such a solution, Reirs said the same arguments were mentioned during other crises – “banks will leave the market”, “banks won’t give loans”. “We are in a free market – if some banks leave, others will come and take their place,” he said.
Also read: Latvian government conceptually agrees on 50% discount for mortgage loan interest rates