Lending has become a driving force of the economy, but now the most important task is to make these achievements sustainable, said the President of the Bank of Latvia, Mārtiņš Kazaks, on Friday at the economic conference.
The growth of lending this year is nearly 15% compared to last year (the corporate loan portfolio has increased by 18.6% this year, while household loans have grown by 8.9%. – editor). Kazaks stated that while progress is noticeable, development is still required, and different market participants are needed. He explained that the role of banks in Latvia and Europe is very large and important, but there is a group of market participants whose role could be more significant.
Among other things, there are no credit brokers in Latvia that would allow easy comparison of offers. There is also a lack of a mechanism for the securitization of loans.
Loan securitization is a financial process where banks or other lenders pool issued loans into one "pool" and turn them into securities. These securities are then sold to investors. As a result, the bank's money is freed up – when the bank sells part of its loans to investors, it gets money back and can issue new loans.
It can be added that in recent years several banks have closed in Latvia (Baltic International Bank, ABLV Bank, PNB, Danske Bank). And today Kazaks is surprised – there is no one to work in the market, and those who still work are issuing loans very cautiously. Yes, even opening a simple account in the frightened Latvian banks can sometimes be difficult.
The Prime Minister Evika Siliņa attended the bankers' conference and reported that lending in Latvia is lower than the average in Europe. To the best of her abilities, the Prime Minister promoted bank loans: “Lending contributes to the growth of enterprises, helps people buy housing, creates new jobs, and increases well-being.”
Taking the opportunity, Siliņa admonished the banks (those that have not yet closed). In her opinion, the development of lending is not only the government's task. It is important for banks to participate more actively.
“Joint work of the government, the Bank of Latvia, and the financial sector, as well as the involvement of enterprises and consideration of societal needs, have allowed for positive results,” Siliņa promised and went off to save the crumbling government.
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