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Home > Business/Finance > Financial Services > Banking
Latvia Commercial Banking Report Q3 2007
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Key Issues
This quarter we have updated a lot of the numeric information in the banking reports. We now have final banking statistics, sourced from the central bank/regulator or trade association, in relation to the end of 2006 for all countries other than Iran.
All of the commercial banking reports need to be considered in the context of a global environment that was benign for banks in the vast majority of the 59 countries for which have collected data. In 2006 the median local currency growth in total assets was 17.2% (in Croatia). The median local currency growth in total loans was 18.2% (in Bangladesh). The median local currency growth in total deposits was 16.9% (in Algeria). In almost all countries local currencies were stable or rising relative to the US dollar. Except in Venezuela and Iran, figures were not distorted by double-digit inflation.
Loan/deposit, loan/asset and Loan/GDP ratios all provide a rough measure of the development of the banking systems. Across the 59 countries for which we have collected data, the median loan/deposit ratio is 85.1% (in Thailand). The median loan/asset ratio is 54.8% (in Romania). The median loan/GDP ratio is 53.4% (in Kuwait). Across the eurozone, by comparison, the equivalent numbers are 126.4%, 50.6% and 119.3%. All three ratios are rising in most of the countries for which we have collected data.
The most important issue in Latvia is that of potentially unsustainable and unrestrained growth, with BMI estimating an average growth in GDP of 12% for 2006, with that strong growth set to moderate somewhat to 9.5% in 2007. Latvia's economy is sizzling, confidence is sky high and optimism is abundant.
The second important issue concerns Latvia’s development as an offshore financial services centre, with Latvia’s banks borrowing money from foreign banks and recycling those funds as loans to the non-bank community.
Latvia’s previously high current loan/deposit ratio remains extremely high at over 200%. Latvia has the highest loan/deposit ratio of any of the 59 countries whose Commercial Banking sectors are surveyed by BMI.
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