President Rinkēvičs says 'tough action' needed over bank 'blackmail' threat

Latvian President Edgars Rinkēvičs is convinced that "tough action" is necessary to provide support to borrowers who, due to rapidly increasing Euribor rates, have difficulty paying interest payments on mortgage loans – though he is not specifying exactly what form that action should take.

Speaking to LTV's Morning Panorama news show October 10, Rinkēvičs denounced the financial sector's threats to turn to the courts if the state sets limits on lending rates as "unfounded blackmail" and said the situation faced by banks is "largely their own fault". 

Rinkēvičs told LTV that during the financial crisis of 2008-2010, people who faced financial difficulties emigrated en masse, which was "the fault of both the state and the financial sector".

"Our people started to leave. Maybe at the moment the risk is not the same. But Latvia has such a situation – if one or ten families leave, just because of their credit [issues], that is a serious problem," said the head of state. "Therefore I don't find this financial sector blackmail to be justified. I think Saeima should take appropriate decisions."

However, he admitted that "It is difficult for me to judge what are the best decisions – in the end the Ministry of Finance, the Budget Committee have various experts, various discussions – but in any case I support quite tough action in this situation."

Meanwhile, in the opinion of the Bank of Latvia, support for certain groups of borrowers is definitely necessary, but it must be precisely targeted, said Santa Purgaile, the deputy president of the bank, which is responsible for market regulation. She was also interviewed by Morning Panorama October 10.

She suggested that certain customer groups undoubtedly need support, but the question is how to precisely target it and provide it to those who need it the most. In the opinion of the Bank of Latvia, this support should be financed from bank profits, from bank income tax or in another way, but without burdening the state budget.

Purgaile emphasized that it is important to find those segments of society that have acute problems and to clearly and precisely target this support, this can be done, for example, by means-testing income. 


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