Mike Collier in Riga -

"Look at it - great weather! Anti-recession weather!" laughs Martin Bondars, pointing out of the window of his sleek minimalist office on top of Latvijas Krajbanka's brand new headquarters.

Outside, it's blowing a blizzard and Rigans are skidding along the frosted walkways in search of shelter. Last winter was mild, grey and dark, so people got depressed, reasons Bondars. A bracing blizzard might be just what's needed to deliver some rare Baltic brightness to wake them up.

It's much the same story with the Latvian economy as a whole and the banking sector in particular. After years of mild conditions in which it seemed impossible not to make money, the new economic climate means banks that got fat and sluggish will struggle to survive. But Bondars' own bank, Latvijas Krajbanka, won't be among the victims of a harsh, bright new economic reality, he argues, while readily admitting that huge challenges lie ahead.

"In the old days - by which I mean before Lehman Brothers collapsed - we were all in the same boat. Nowadays, we are all in the same submarine," he tells bne. "The current world financial industry has failed to deliver two basic things: stability and sustainability. The new question is what kind of measures should be taken to provide these things?" he says.

"I think fundamentals don't change. Even in 2004, our then-president Vaira Vike-Freiberga was emphasising the need to run sound fiscal and economic policies. But society felt things were high and of course politicians just enjoyed the ride. The current situation will teach certain things to society about which are the right policies for the country and which should be avoided."

Bondars says that concluding deals such as an agreement with the International Monetary Fund (IMF) are very important. "Then it's execution, execution, execution - that makes it or breaks it. That's what Latvia needs - a roadmap to success."

If the president calls

When Bondars talks about presidents and politicians, he's not just your usual name-dropping bank boss, either. A former head of the president's chancellery himself, incoming President Valdis Zatlers turned to Bondars for advice on nominating a prime minister and the tall, elegantly suited banker could also be glimpsed flitting around the periphery of the Latvian government's IMF talks.

Bondars is seen as intelligent, perceptive and above all, completely honest - qualities that are badly needed on the Latvian political scene. But he prefers to play down his undoubted influence. "All capitals tend to be big and small. They are big because they are capitals and they are small because people who know each other there talk amongst themselves. There is a certain group of people that is communicating. It's not a secret society - anybody can be on board - but in order to be on board you have to try to understand the processes," he says. "If the president calls, there is a certain sense of responsibility and duty as a citizen of this country, not as president of the bank."

Krajbanka recently made unwanted headlines when a Latvian pop singer made some ill-judged remarks between songs at a concert, joking with audience members that they should wait until he had finished singing before taking their money out of Parex, which was being nationalised, and Krajbanka. Soon afterwards he was arrested and questioned by police, sparking outrage in the press and launching a debate about freedom of speech in Latvia.

Bondars takes an interestingly nuanced view of the affair that's been largely absent from the debate. "The young gentleman is young and talented, and no one in the bank wishes him harm. I think and hope he understands what he has done. You have to understand Latvia's recent history. In the late 1980s and early 1990s, the leaders of the singing revolution were journalists, singers and intellectuals and they still enjoy very high unconditional credibility in society."

"It's just the way things happen in the Baltics. People who have a microphone and a stage have more of a burden on themselves - including myself," he says.

Speaking of the bank, Bondars reckons its loyal and prudent customer base can be thanked for providing the stability lacking at local rivals such as Parex. "Our branch network has always been the largest in the country. Yes, they are substantial fixed costs and it's no secret that in the years other banks were making huge profits, we were profitable but didn't enjoy the same numbers. But we are very appreciative of our base customer, which is the small depositor in Latvia. We love them - especially when you see across the world that the interbank market isn't functioning. It's a very good customer to have on board," he says.

Even the bank's name has helped. "Krajbanka means "savings bank," and Bondars says that even two years ago, when everybody was hyped on spending and getting loans, his bank was saying people should save more. "We have always emphasised saving," Bondars says.

Lithuanian bank Snoras owns four-fifths of Krajbanka's shares, but Bondars says the links between the two Baltic banks shouldn't be overplayed. "Yes, there are synergies. We cooperate, but there are differences as well. There will not be Snoras Latvia. Latvijas Krajbanka is a brand by itself with a real value on our balance sheet," he says.

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