Former Latvian Finance Minister says country’s main banks act “like a cartel”

By bne IntelliNews November 10, 2023

The reaction of Latvia’s four largest commercial banks to proposals by the Budget and Finance Committee of the Saeima (parliament) for the support of mortgage borrowers is tantamount to operation of a cartel, said the head of the committee Janis Reirs (New Unity) in an interview with Latvian Television's program Rita Panorama (Morning Panorama),, the website of national broadcaster LSM, reported on November 9.

The amendments to the Consumer Rights Protection Law would provide support for mortgage borrowers, for example by introducing a mortgage borrower protection fee for banks. In response, the banks have threatened legal action, which former Finance Minister Reirs characterised as "intimidation".

"We have the highest loan rates, we have the smallest lending, the most expensive account servicing in the Baltic countries, the most expensive transaction volumes in the Baltic countries," said Reirs, noting that "Swedish banks" themselves had been given plenty of assistance in previous years by Latvian governments and taxpayers when they found themselves in crisis, and had not fulfilled promises that things would improve. Now the banks appear to be acting in concert, Reirs suggested.

"That means that they are something like a cartel... four together, that looks like a cartel, that really looks like a cartel in the way it works," said Reirs.

When asked if the Competition Council should therefore evaluate the operation of the four largest Latvian banks, Reirs replied that the institutions should rather evaluate themselves.

"Standing all four together against the whole country and saying 'We won't finance anything' – doesn't that sound like a united front? What happened to competition?" 

The proposal advanced by the Budget Commission of the Saeima envisages support for those whose mortgage loan repayments exceed 20% of their income.

The banks argue that imposing such repayment rules constitutes artificial intervention in credit pricing. According to them, this will significantly limit the competitiveness of local lending companies and will not improve access to lending services, as it will have an impact on the cost of loans in the future.

Banks believe that burdening them with extra layers of paperwork and administration is not justified and that the support is not sufficiently targeted, as the beneficiaries will include the wealthiest part of society, which does not need such support. 

According to the Finance Latvia Association, which represents most of Latvia's commercial banks, "the industry advocates for help [for] those who really need it, and not to almost all borrowers, as currently envisaged by the Saeima Budget and Finance (Tax) Commission's amendments to the Law on the Protection of Consumer Rights for the Protection of Mortgage Borrowers, said.

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