The government should promote the topic of lending to the national economy, opening accounts for local businessmen and investors, as well as the reduction of banking service commission fees to ensure Latvia becomes more competitive in this field in the Baltic region, says the chairperson of Saeima’s Economic, Agricultural, Environmental and Regional Policy Committee Linda Matisone.
According to her, no economic transformation is possible without addressing this issue.
At the same time, she reminds the government to act to promote the involvement of banks in Latvia’s national economy.
Matisone notes that the situation in the national economy is chaotic: “Banks’ profits are rising, but the economy is buzzing. The government urgently needs to take concrete steps to address the situation, for example, by reducing the banking police functions introduced during the “overhaul”, lowering the threshold set for lending against equity from 100% to 50%”.
According to her, new market players should be invited to increase competition in the banking sector or adopt a bank excess profit tax in case of failure to comply with certain conditions.
Matisone explains that “after capital repairs” the banking sector more resembles an institution with police functions that interferes with development of business activities. Businessmen and potential investors have great difficulty with opening accounts in Latvian banks, forcing them to leave to neighbouring banks in Lithuania and Estonia, heating their respective economies instead of Latvia’s economy.
“It will not be possible to resolve these issues without changing priorities in policy implemented by the Office for Prevention of Laundering of Proceeds Derived from Criminal Activity (FID),” says Matisone, stressing that banks’ initial functions, such as lending to the national economy, should come back.
This way banks would assist businesses instead of interfering with them.
One important aspect is the reduction of banks’ commission fees. According to information available to the committee, among Baltic states Latvia has the highest commission fee for banking services.
Additionally, Matisone invites the government to reach out to new potential financial market players, because there no healthy competition in Latvia’s banking sector to speak of. Banking sectors of neighbouring countries are mentioned as examples.
“Looking at our neighbours Estonia and Lithuania, in addition to large banks operating in Baltic States, we can see players like LHV Bank in Estonia and Revolut in Lithuania. Both of them actively attract Latvian clients.
Finally, considering the enormous profits in the financial sector in the first half of the year and the still slow lending, it is worth starting a discussion about a tax on excess profits, which is a practice employed in Lithuania,” said the politician.
Together with management of Latvian banks and the Ministry of Finance, the committee has discussed the topic of lending on multiple occasions. Matisone said the proposal to increase lending should be resolved urgently.
It is planned for the topic of lending and accounts for potential investors will be addressed after the break in the session of the committee.
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