Speaking after presenting a review of 2016 in the banking sector, Peters Putnins, chairman of the Financial and Capital Markets Commission (FKTK) said the banks were in a good position with healthy profits and high-quality financial services on offer, but warned that the favorable conditions would not see any loosening of regulatory oversight.
While admitting that a considerable number of foreign clients had taken their business elsewhere (foreign deposits were down by 26% or €3.3 billion), he told reporters this was a positive sign as those choosing to bank elsewhere were likely among the riskiest client groups who might encounter problems with strict governance rules and full disclosure of their cash sources.
"This year, banks will have to get out of the usual comfort zone and adapt their business strategies to ensure a stable income, taking into account the slower development of the Latvian economy, the low interest rate environment, as well as tougher competition in the area of FINTECH," Putnins said.
Although last year bank profitability ratios were significantly ahead of the EU average, that was largely due to the sale of shares in VISA Europe that gave banks a huge windfall, Putnins explained.
The banking sector's profits amounted to €454 million compared to €416 million the previous year. However, removing the "VISA effect" gave more modest profits of €335 million.
He also called on media and others to stop talking about 'non-resident desposits' and 'resident deposits' and instead to refer to local clients and foreign clients, as the business models of retail banks and 'non-resident' specialist banks converge.
23 financial institutions operated in Latvia last year, consisting of 16 local banks and 7 branches of banks based elsewhere.
