PM: Shell company ban could sink 0.5% of GDP

Take note – story published 6 years and 2 months ago

The proportion of high-risk shell companies among the clientele of Latvian banks has shrunk to 30%, and current estimates say Latvia's GDP may decrease by about 0.5% in connection with the looming shell company ban.

That's what Latvia's Prime Minister, Māris Kučinskis, told LTV on April 5. 

He pointed out that but a few years ago, the said proportion was around 60%, decreasing to 40% early this year and to 30% after ABLV Bank closed itself down. 

"The [banks] have heard the government call that we are scrapping this way of doing business," said Kučinskis. 

As reported, high-level government officials recently announced that Latvia's banks will be banned from doing business with shell companies.

A planned government review of the ban has been postponed for a week so that the ban would be narrowed down and startup companies wouldn't be affected

Kučinskis also voiced optimism that Latvia is developing steadily, and the setback will not mean as much. 

"We'll live through it," he ventured to say. 

The Finance and Capital Market Commission (FKTK) said previously that there were 26,081 shell companies among clients of Latvian banks, including two companies of Latvian origin.

Shell companies account for 36.57 percent of the Latvian banks’ aggregate loan turnover, while their share in the non-resident segment is 44.5 percent.

FKTK head Pēters Putniņš previously said non-resident deposits in Latvian banks could shrink about €4 to €5 billion if they stop doing business with shell companies. 

There are now ten banks in Latvia that specialize in doing business with foreign clients. 

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