RIGA - If the economic situation does not improve in Latvia this year, there may be trouble with restructured loans, which may cause a second wave of problems for banks, the Financial and Capital Market Commission’s representative, Anna Dravniece said during a debate organized by the business portal Nozare.lv. Residents’ incomes are not increasing, but they still have to continue honoring their obligations to banks. “We must realize that these are mostly long-term liabilities, whereas restructuring is just a short-term solution,” stressed Dravniece.
Economist and businessman Janis Oslejs also said that the economic situation remains complicated, and if economic growth does not accelerate, Latvia may end up with banks that will be stuck with restructured loans for decades, and have limited options for issuing new loans.
However, Swedbank board member Daniils Rulovs tried to dispel the Financial and Capital Market Commission’s doubts, saying that Swedbank, at least, had a sufficiently restructured portfolio. “What we have restructured is a long-term solution, not short-term. I cannot speak for the entire sector though,” said Rulovs.
Altogether, Latvian commercial banks had restructured 69,903 loans worth 2.8 billion lats (4 billion euros) by Dec. 31 last year, the Financial and Capital Market Commission said earlier. The proportion of restructured loans in banks’ total loan portfolio was 19.9 percent.