Bankers: credit supply high, demand low

  • 2003-10-30
  • Baltic Business News
RIGA - Latvian bankers have begun to complain that there currently is an insufficient number of projects on the market to credit.

During a meeting last week with Deputy Prime Minister Ainars Slesers, bank representatives said they had free resources for their loan portfolio, but that there were not enough creditworthy projects to invest in.
Bank officials added that they were prepared to invest in large infrastructure or housing projects, but few such projects were coming online.
Liga Purina, vice president of Parex Bank, said that since there was not enough private-sector demand for credit then banks would be willing to increase exposure to municipal infrastructure projects.
Slesers said he believed that in order to create the projects a better system of co-operation among the state, municipalities and the private sector should be created.
The president of the Latvian Association of Commercial Banks, Teodors Tverijons said that, in order to make appropriations of resources allotted by EU structural funds, the "hands of municipalities should be untied," as their current opportunities for taking credits are limited.
For that, however, a political decision would be needed, he added.
Another problem, Tverijons explained, is that the state often chooses to borrow from foreign financial institutions, like the World Bank, instead of using Latvian commercial banks. This is due to the misleading belief that the loans offered by Latvian commercial banks cost more. However, bureaucrats usually compare only the interest rate when accessing costs of competing credit facilities, forgetting about administrative expenses and the currency risk.
The Latvian Development Agency is currently working out a model of appropriation of EU resources. The agency has already elaborated several possible programs of action in regard to banks, one of which would give EU resources directly to banks that in turn would be issued in credits under preferential conditions.