President of Latvia Edgars Rinkēvičs and Governor of the Bank of Latvia Mārtiņš Kazāks met in the Riga Castle on 5 September. Meeting focused on current microeconomic trends and lending policies of Latvian commercial banks, including high mortgage interest rates and their negative impact on financial stability of households. President and Governor also discussed business crediting challenges in Latvia.
President Rinkēvičs urged central bank to be more active in addressing both challenges. First, Bank should provide interest rate spike assistance to households in distress immediately. Second, Bank of Latvia should find key to unlocking more capacity on lending market to make sure growth is fully supported as we exit a period of high inflation.
According to President of Latvia, lack of competition between Latvian commercial banks has led to stagnation of crediting costs at a high level and low deposit rates compared to, for example, State Treasury savings bonds, as well as no possibility to earn interest rate on current account funds held by private individuals.