Pēters Putniņš: The year 2018 marks a watershed in the history of Latvian financial sector

01.07.2019
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The Financial and Capital Market Commission (hereinafter – the FCMC) has published the Annual Report and Activity Report 2018 of the Financial and Capital Market Commission containing information on the FCMC's activities in the reporting year, as well as performance of the supervised market participants in 2018.

Commercial banks remain the largest segment of the Latvian financial and capital markets in terms of assets; however, since implementing a strict risk mitigation approach by the FCMC in 2016, the Latvian banking sector also narrowed in 2018 and its share in the financial sector assets shrank to 79% (2017 – 84%).

FCMC Chairman Pēters Putniņš points out: “A completely different customer profile is the future of Latvian banks, there is no longer a division between domestic and foreign customer banks, they all now focus on the markets of Latvia first of all and then on the EEA and OECD countries.  Last summer, all of our banks stopped servicing shell companies banned in Latvia. In three years, the Latvian financial sector had been abandoned by EUR 10 billion, thus significantly reducing the risky fast lending business and releasing our financial system and the country of undue reputational risk. Domestic and European Union countries’ deposits were dominant in the Latvian banks, totalling 91 percent. There has been no such situation over the last 25 years. In a couple of years the banks’ performance will demonstrate the profitability of new business strategies and the ability to absorb the effects of the period of changes. In this way, we will have the banking sector commensurate with the size and capacity of the Latvian economy.”

In the process of change management, the most important task for market participants was to phase out high-risk foreign funds from Latvia. In 2015, the foreign money constituted 54% of total in Latvian banks, at the end of 2017 – 39%, but in 2018 it had reduced to 20%. Moreover, revising the risky customer segment the CIS customer exposure was reduced to 5 – 6%, while the foreign customer payments in the US dollars shrank more than 26 times. The quality of banking credit portfolio improved in the reporting year. Domestic deposit volumes steadily increased in the reporting period, offsetting reductions in foreign deposits, demonstrating stability across the sector, and reaching 13 billion euro at the end of 2018.

FCMC Chairman Pēters Putniņš: “This year we completed the most ambitious reform in the financial sector. The self-cleaning process was initiated and controlled by the FCMC to change the former business approach and reduce the likelihood of financial crimes. At the same time, we have attained the purpose of setting up such an institution as the FCMC in our country: stability in the sector and customer protection. This is demonstrated by the significant performance of our team – putting the ABLV Bank self-liquidation process on constructive tracks. The FCMC will continue monitoring the process, an unprecedented solution to date for winding up the bank in Latvia, marking a historic watershed in normal procedure. Thus I believe the FCMC as the competent authority may be really pleased with its performance and this is an appropriate starting point for restoring the international reputation of the Latvian financial sector. The FCMC has done its work as regards supervision of the sector, and we hope that other responsible authorities will also successfully perform all their tasks so that to receive a positive assessment of our financial crime prevention system from the international partners.”

The Annual Report and Activity Report 2018 of the Financial and Capital Market Commission also contains relevant information on progress made in the field of financial sector supervision, licensing, regulatory requirements and financial crime prevention. The Report gives an insight into the financial stability and customer protection system, which in Latvia is built up of the Deposit Guarantee Fund, the Fund for the Protection of the Insured, the financial instruments market customer protection system and financial stability fee. Among other issues, also developments in international cooperation, public awareness campaigns and promoting financial literacy are reflected in the Report.

The report is available on the FCMC website, section About Us/Annual Reports:

https://www.fktk.lv/wp-content/uploads/2019/09/GP_2018_EN_final.pdf

Summary of the FCMC’s change management process 2016-2019 at:

https://www.fktk.lv/wp-content/uploads/2019/07/PREZ_transformation_1072019_2016-2019_en-2.pdf 

Further information:
Communications Division
Phone: +371 67774807; +371 67774808;
E-mail: ieva.upleja@fktk.lv, dace.jansone@fktk.lv

More about the FCMC:
www.fktk.lv, www.klientuskola.lv,
Twitter.com/FKTK_LV

Contacts


Address:
Kungu iela 1, Riga, LV-1050
Phone:
6 7774800
E-mail:
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