Banks' future will be clear in spring

1998-10-15

RIGA (BNS) - Latvian banks may incur severe losses, but Trasta Komercbanka President Girts Rungainis predicts the actual situation will be clear only in April.

"At this stage nobody can tell what the situation in banks is like. The Bank of Latvia implements very good control over the banks and I think the situation in the banks is not that bad," Rungainis said.

Rungainis said Latvia's commercial banks could suffer certain losses or even lose all this year's or previous years' profit, but it's too early to declare some banks bankrupt.

He pointed out that after the banking crisis in 1995, the Bank of Latvia applied significantly tighter supervision over commercial banks than Estonia's central bank.

Rungainis said that financial circles had been for some time speaking about possible turmoil in Estonia's banking system noting "this situation was looming already for a long time because several banks were unliquid."

Janis Ogsts, head of brokers section at Latvijas Investiciju Banka, said while last week was relatively calm for the Latvian financial system, Estonia was shocked with ERA Pank's suspension.

Other three banks, EVEA Pank, Forekspank and Eesti Investeerimispank, are in trouble due to excessive links with the Russian financial market and large investments into Russian securities.

Ogsts pointed out that these developments did not leave any significant impact on the Latvian banking system and securities market. He said the Estonian situation made everyone in Latvia worried, though.

So far only Latvijas Kapitala Banka went bankrupt under the influence of the Russian crisis, but it is well known that several Latvian banks are actively working on the CIS market, he noted.

He stressed that Western banks that were working on the Russian market have written off around 80 percent of the resources invested into Russian securities.

Latvia's banks, besides investments in Russia, have investments in securities in Ukraine, Moldova and other countries as well and credits issued to residents and non-residents working closely with Russia. That made Ogst predict there might be significant changes in the Latvian banking sector.