Latvian banking sector is stable - Kazaks

RIGA - The Latvian banking sector is stable, Bank of Latvia president Martins Kazaks told LETA.

"There is no reason for any concerns about the Latvian banking sector. Of course, there are always risks in business, but our last evaluation after turbulences in Switzerland do not show any systemic problems in the Latvian banking sector. The banking sector is stable, the situation is stable," said Kazaks. 

Asked about closing down and taking over several banks in the US and Switzerland, Kazaks said that there have been steep changes in the world's economies in recent years - we have seen a steep inflation, a steep interest rate hike aimed at slowing down the inflation, therefore it is naive to think that it will not cause any fluctuations in the economy.

"It is possible that certain risk "pockets" appear in separate segments of the economy if changes are so rapid - we should be careful, we should follow the situation and possibly interfere if necessary. Life is life. At the same time, I will underscore that Europe has learned much from the 2008 financial crisis and has improved many areas. We see a completely different monitoring mechanism. Thus, institutionally, the European banking and financial system is much stronger, the capital of banks is much bigger, there is liquidity. And the European Central Bank (ECB) has instruments that will help to solve problem situations. There is no reason at all to compare the current turbulences in the financial market with what happened in 2008. This is not a European banking crisis," said Kazaks.

Kazaks underscored that changes in the economy had been rapid, uncertainty is still high - we do not know how the war in Ukraine will end, we do not know what will happen with energy prices in the fall, we do not know how opening of China after Covid-19 pandemic will affect the demand and inflation in the world. Thus, we should continue to follow the events, be cautious and, if necessary, the ECB will interfere in order to stabilize the situation.