Banks, Financial Services, Latvia

He said that in the present situation banks should rely on the local market, but Latvia is a small country, there are not that many residents and they are not very wealthy, the economy is rather small, therefore banks will not survive just with the domestic market and will have to use transborder transactions.

“It is clear that the number of banks we have in Latvia cannot rely just on the local market. Transborder transactions should be used, but the question is – in which countries this model can be stabilized. Russia and other CIS countries bring along a chain of problems and risks. The number of banks in Europe is not small, Germany has several thousands of banks. Is there anything unique we can offer? Is it the service level? That is the biggest challenge for our banks,” said Putnins.

He also said that another important issue is how to earn money. “Lending brings along provisions because there will always be someone who does not return the loan. It requires rich and strong shareholders. There should be experience. There should be active business environment,” he said.

According to Puntins, the banks could not think of anything creative in their new business models.

Asked about potential consolidation of banks, Putnins said he may not reveal details, but he cannot say that there is activity in this direction.

Putnins said that the new business models of banks who so far served non-resident customers are very cautious. “The banks themselves will have to make sure whether these models are functioning, they will have to convince the watchdog and demonstrate profits,” said Putnins.

As reported, FCMC announced in March that it has completed assessment of the new business models of 12 banks.