More bank branches to close in challenging year

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At a joint press conference Thursday, the Association of Latvian Commercial Banks (LKA) and the financial regulator, the Financial and Capital Markets Commission (FKTK), said that 2014 had been challenging year and 2015 was also likely to require a cautious approach.

FKTK chairman Kristaps Zakulis said he expected more banks to follow in the footsteps of SEB bank, which recently announced the closure of several branches, following on from a similar move by its rival Swedbank.

However, he said the development was to be expected as part of "the general tendency in a 21st century banking system" where the majority of business was transacted online.

"The events in neighboring countries, although they have not had a direct impact on the banking sector as a whole, support a prudent approach to future development and growth opportunities," Zakulis said.

LKA chairman Martins Bicevskis said 2014 had been a mixed year, featuring on one hand the smooth introduction of the euro as the national currency but also marked by a degree of political instability and the economic impact of sanctions between Russia and the West.

"Sanctions and the fall of the ruble had an effect... it affects particularly those banks that rely on clients from that region," Bicevskis said, referring to Latvia's non-resident banking sector, which accounts for just over half of all deposits.

The export of financial services grew by 12% but the credit portfolio shrank by 6%, and both men identified the resumption of lending as a key to future economic development.

Bicevskis said banks were being restrictive in their lending because legislative changes meant they did not have a "stable environment" in which to operate and called on government to think long-term.

Despite their unanimity on all major issues, the pair denied that the relationship between regulator and regulated was too close.

"On some issues we are shoulder to shoulder, on others we are not... I assure you that after this press conference, Mr Bicevskis will be sitting on the other side of this table," Zakulis told journalists.

"Thank God!" joked Bicevskis.

In 2014 Latvian banks made a profit of €311 million, up from €246 million in 2013.

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