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Bank expert: Enough competition in Latvia’s banking sector

There is sufficient competition in the banking sector in Latvia, but it would not be proper to claim that it will not expand, LETA was told by the board chairman of Swedbank in Latvia, Lauris Mencis.

“I think that the 14 banks in Latvia are quite normal given the size of the country’s economy,” Mencis says. “Four of them are universal banks, more than ten of them provide financing to legal entities, and several are specialised niche banks. Of course, there can always be more competition in theory, but no one can say that there is no competition at this moment.”

The board chairman goes on to explain that it is not right to say that competition couldn’t increase simply because of Latvia’s open economy and free movement of capital. Entering the banking sector, however, requires lots of money and regulation. Not everyone can obtain a banking licence, because capital is needed, and regulatory requirements are becoming more severe.

Mencis also says that creditworthy individuals and legal entities survey several banks before taking out a loan: “We compete for customers every day. The rhetoric about no competition which we hear from time to time lost traction a long time ago. We need to look critically at who is making such statements and why this is being done.”

The Swedbank representative in Latvia adds that when it comes to the Indexo Banka, it is very clear how long it took between stating the goal of establishing a bank and obtaining the relevant licence.

“If someone thinks that everything in the industry is simple and that bankers sit around and make money without doing anything, then that is a very good indication of what the process will be when getting started in this field of operations,” Mencis says.

The CEO adds that the value of Indexo is that for more than a decade, no bank has received a new licence in Latvia, while other banks have left the market, undergone liquidation, or engaged in mergers. Now, however, there is a new player.

“This is very good,” Mencis declares. “I think that we and everyone else was interested in seeing what kinds of offers Indexo would make and what their marketing would be. Indexo Banka is not claiming a significant market share, of course, so we don’t see its impact on the market in numerical terms, but we certainly sense new dynamism in the marketplace, and that is all for the good.”

Asked whether Latvia’s market might be interesting for a new international player, Lauris Mencis replies that it is not just classical banks which are present in Latvia. So, too, are institutional banks such as the European Investment Bank, the Nordic Investment Bank, the European Bank for Reconstruction and Development, and the Development Finance Institution Altum.

“If we put all of this on Latvia’s economic map, then we see that the level of saturation is quite high,” Mencis says. “Especially if we are talking about the segment of large enterprises, it is evident that large manufacturers in Latvia are looking at or already using offers from institutional banks. There is enough competition in this area.”

Swedbank is Latvia’s leading bank in terms of assets.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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