Last year deposits of non-resident went down by 26,3% or 3,3 billions Euro — to 9,2 billions Euro. This can be considered the price paid for the integrity of deposits in Latvian banks.
As a result of introduction of more stringent regulations, multi-million fines and even revocation of a license (Trasta komercbanka) the banking sector lost 3,3 billions Euro. On the other hand Latvia was accepted as a member-state in the Organization for Economic Co-operation and Development (OECD). This organisation made it a requirement for Latvia to perform the great banking system clean-up as a precondition for admission to OECD.
Along with large scale clean-ups in the industry the poor economic growth in the countries of origin of customers such as Russia, Ukraine, Kazakhstan could be another reason for withdrawal of deposits: it is time to open the Latvian thrift-box.
Withdrawal of non-residents was not compensated by the increase of savings of residents of Latvia.
In 2016 the amount of resident deposits in Latvian banks increased by mere 12,6 % or 1,4 billions Euro, reaching thus the amount of 12,2 billions Euro. This, apropos, is an all-time high.
The record is a sad one, alas, — enterprises instead of investing into new equipment and ordinary consumers instead of spending money and warming the economy prefer to save their free money. Which means that either the economic situation in the country does not inspire confidence or the crisis of 2008-2010 is still too fresh in the memory of locals.
However that may be, 13 out of 16 Latvian banks may be considered focused on non-residents, since the share of non-resident assets in the portfolio exceeds 20%. The average foreign investor keeps in deposit in Latvia 108 047 Euro compared to the local customer's 705 Euro. Risks associated with the work with foreigners require additional liquidity: in the middle of the last year it remained at the level of 77,5%.
After dealing with non-residents Latvian policy-makers present the banks with new challenges. They must become more sophisticated technically.
The banking sector development plan prepared by the Ministry of Finance for the Cabinet of Ministers clearly states: "In the next few years the banks will have to continue developing and providing contemporary, safe and innovative financial services suited to a digital society, and maintain the existing traditional channels of services".
However, the plan fails to mention outright that introduction of technologies goes hand-in-hand with job cuts, the number of which in Latvian banking sector decreases by 5 to 10 per cent each year.