VILNIUS - Reports of Scandinavian banks repatriating funds from the Baltics back to their home turf, squeezing the locals, are unfounded, according to the Bank of Lithuania's chairman of the board of directors, Reinoldijus Sarkinas. Currently, a total of 34.2 bln litas (9.92 bln euros) have been injected into the Lithuanian banking system from Scandinavian banks, he says, and this money is circulating through the Lithuanian economy.
"As the agreements with the main partner banks expire, and if there are no further opportunities for investments in Lithuania, part of financing returns to the main banks; this, however, does not mean that the banks' profit leaves Lithuania," explains Sarkinas, reports news agency ELTA.
Sarkinas said that it was natural that once economic recession hits an economy, its consequences would be felt throughout the banking sector. "Companies will go bankrupt, will fail to repay loans, the number of bad loans will increase and banks will suffer from these losses," he says.
The central banker rejects the claim that banks have stopped lending to businesses. He says that, for the first half of this year, a total of 4.5 bln litas in new funding was loaned to businesses, this even though the overall loan portfolio shrank in size by 1 percent compared to the previous six months.