Swedbank assured Baltic Reports that the bank had no intentions of scaling back Latvian operations.
RIGA — Despite earlier statements to the contrary, Swedbank now says that it has no intention of pulling back its Latvian operations if a homeowner protection bill were passed by the Saeima.
On Monday a Swedbank executive told Financial Times that the Latvian government’s proposal to protect mortgage holder’s protection was approved by parliament it might cause the bank to scale back its presence.
“If these proposals go through, it would be very difficult for us to continue lending in the mortgage market,” Thomas Backteman, vice-president of corporate affairs for Swedbank, told the newspaper.
On Monday Friday Prime Minister Valdis Dombrovskis ordered the drafting of legislation that would prevent limit banks to collecting the amount of collateral on a defaulted bank. Banks would not be able to collect more than the current market value of the property, and in the crisis-hit Latvia property prices have fallen with up to 70 percent. This would entail huge losses for banks, Backteman said, adding that these proposals would deeply violate European Union law.
Backteman also warned that Dombrovskis’ proposal would seriously limit the amount of mortgage loans the bank issued.
“This will have negative consequences for all Latvian customers and the whole Latvian society and would substantially delay the economic recovery in Latvia,” Backteman said.
However, Swedbank’s Latvian subsidiary toned down the drama Tuesday.
“Thomas was only saying that if laws are changed retroactively, it is against European principles. It would be hard for any company, any business to operate in such a country,” Ivars Svilans, spokesman for Swedbank in Latvia, told Baltic Reports.
Svilans said the mass media has distorted Backteman’s message.
Indeed, Backteman said in an Oct. 9 statement that Swedbank is “deeply engaged in finding a sustainable solution for all parties, and have no other intention than to stay in Latvia long term”.
According to Svilans, Swedbank has increased their capital in the Baltics this year, and the long-term presence plans were confirmed in Baltic Development Forum in Stockholm last week.
“There was a bank crisis in Sweden during the 90s. Did Swedbank leave Sweden for that matter? It is the same with Latvia. The situation is a bit like the morning after a huge party in your apartment. The mess around is not a reason to leave your home and sleep on a bench in the park. You have to clean it up,” Svilans tells Baltic Reports.
Swedbank has lent 61 billion kronor (€5.9 billion) in Latvia, out of which 24 billion are mortgage loans. Swedbank, as well as Nordea and SEB, are covered by the Sweden’s bank guarantee program worth 1.5 trillion kronor (€145 billion). These funds apply to subsidiaries.
