Having summarising annual results of implementation of the objectives of National Strategy for Financial Literacy in Latvia 2014–2020 (Strategy), the Financial and Capital Market Commission (FCMC) has concluded that indicators of strategic objectives in financial literacy show positive trends, i.e. residents more actively use e-services in the financial sector, financial planning habits change in favour of long-term provisions, trust in the State guarantee system enhances, as well as healthier loan-to-deposit ratio is reached – 90/100.
Assessing fulfilment of strategic objective “Planning finances and saving tradition”, it is obvious that this tradition has been strengthening, as during 2016 total savings of households in Latvia grew by 1.0 billion euro (i.e. deposits with Latvian commercial banks, in 2nd and 3rd pillar pension savings and financial instruments) – deposits with banks increased almost by 9%, totalling 5.9 billion euro, pension capital in 2nd pillar grew by 18%, and by end of the year reached 2.8 billion euro, but contributions to the 3rd pillar increased by 6.3%, – total accumulated capital was 380 million euro. Deposits by the participants of corporate credit unions (private individuals) have grown by almost one million euro. Moreover, most of population (55%) rely on the State guarantee scheme in case of unavailability of their deposits, and the recognition ratio of Deposit Guarantee Fund (DGF) increased by 6% in 2016.
Also, the second strategic objective “Integrity of financial service environment” (fair offer by the sector and responsible choice by the customer) has been realised: the number of participants in the 3rd pillar pension system (private pension funds) grew by 18 thousand persons in 2016 (in total, 272 209 persons), 5 259 new endowment life insurance contracts have been concluded, the number of online banking users reached 1 441 124 persons of total customers (in 2013 – 1 415 000), as well as risk insurance has become more popular among Latvia’s residents – on the average 151 euro per capita (in 2013 – 122 euro). According to data from the Control Service, the number of suspected frauds and irregularities resulting in initiating criminal proceedings declined to 90 cases in 2016 (in 2015 – 194 cases).
Overdue loans in the banking sector shrank to 5.3% (highest peak of 19.6% in 2011). In 2016, the number of problem mortgage loans (past due more than 90 days) granted to households dropped significantly – from 5 400 to 4 100, or 100 million euro overdue mortgage liabilities less than over the respective period of previous years (in 2015 – 280 million euro, in 2016 – 180 million euro). According to the Consumer Rights Protection Centre (CRPC) data, the number of past due loans in 2016 dropped also in the non-banking sector; however, the total number climbed because of the higher volumes of new lending on the average in this market segment. The overall amount of overdue liabilities in the non-banking sector has been increasing from year to year.
New mortgage loans issued to households both in the number and amounts have grown almost by half – 14 393 contracts concluded for 362 million euro (previously 8 647 new contracts and 271 million euro). New lending to domestic micro enterprises and SMEs have increased by almost one-third – 5 371 new loans in total amount of 812 million euro (in 2015 – 3 878 new loans in the amount of 577 million euro). In the non-banking sector, last year the number of new loans for the first time reached 500 million euro.
Overall robust domestic economic situation and low interest rates in the euro area have ensured financial stability of Latvian households, thus contributing to the fulfilment of the third financial literacy objective – “Sustainability of public finances and developments”. Gross domestic product (GDP) per capita over the period increased to 12 321 euro. Households’ loan-to-deposit ratio in 2016 was 0.9, deposits exceeded liabilities, and the indicator “household loans to GDP” was 20.9% (in 2013 – 25%). Total domestic customer (households and enterprises) deposits in commercial banks reached 12.2 billion euro in 2016.
Data on the compliance with Strategy objectives available on the FCMC website at: http://www.fktk.lv/lv/komisija/par-mums/strategija1/2014-02-24-latvijas-iedzivotaju-finansu-pratibas-strategijas-20142020.html
Chief Public Relations Specialist
Financial and Capital Market Commission
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