Latvia's Economic and Financial Outlook
Well Capitalised and Liquid Banking Sector
Latvia's banking sector is well capitalized; large share of banks is owned by large Nordic banking groups.
.
Key Highlights
Capital Ownership of the Banking System (1Q 2019)
The Latvian banking sector is dominated by subsidiaries and branches of banks
from the European Economic Area, mostly Nordic countries1
• Capitalisation and liquidity ratios are well above minimum requirements.
.
The three largest banks are directly supervised by the ECB. Four banks fall
under the remit of the Single Resolution Mechanism
The fallout from the closure of the Latvia's largest non-resident-serving bank
ABLV in February 2018 has been well contained - non-resident deposits have
continued to fall, but the liquidity and capital ratios of the banks serving the
sector remain high. The reduction of non-resident deposits has markedly
lowered Latvia's short-term external debt without undermining the country's
economy, fiscal position, or financial system
Source: FCMC, 2EBA risk dashboard, fully loaded ratio
Capital Adequacy (%)
32%
19%
49%
Source: Bank of Latvia
Liquidity Coverage Ratio
26
■Domestically
■Nordic
■Other
400%
זוווווו-----
350%
300%
250%
200%
150%
100%
50%
0%
2011
2012
2013
2014*
2015
2016
2017
2018
2019
Q3
Q4
Q1
Q2
2016
Q3 Q4
2017
Q1
Q2 Q3
Q4
Q1
2018
2019
Total capital ratio
CET1 ratio
Minimum requirement for total capital ratio (8%)
Liquidity Coverage Ratio (%)
Minumum requirement
2208642086420
18
16
14
12
10
Source: FCMF | Note: As of Q1 2014 capital adequacy is calculated according to the CRDIV/CRR requirements and is
not directly comparable with the data until Q1 2014 due to differences in methodology. Tier 1 ratio matches CET 1
ratio. The regulatory minimum capital adequacy requirement is 8%. Since 28 May 2014 the FCMC also applies a 2.5%
capital conservation buffer.
15
Source: FCMCView entire presentation