2024-07-22 14:19:07
The first data show that a certain period of stagnation and waiting may have ended – companies and private individuals are gradually returning to their postponed plans and the demand for loans is increasing, Bajare informs.
She also mentions that if there are no global upheavals, this trend will take hold this year, but lending is not the only current issue in the financial sector.
Bajare lists that this year’s topical issues in the field of finance are and will also be the creation of savings for citizens, strengthening financial literacy, limiting fraud and the availability of financial services
The head of FNA reminds that support for mortgage borrowers who have already received or will soon receive the second support payment, which is paid out by banks to people in connection with the rapidly rising EURIBOR rates, entered into force this year. In the first quarter of this year, the banks transferred a total of 24 million euros to the state for this purpose, a similar amount was also transferred for the second quarter, but during the whole year they will be almost 100 million euros.
There were heavy discussions with politicians about the design and administration of the fee for the industry, which eventually ended with the fact that the methodology, which explains all issues related to support for borrowers, was developed by the FNA in cooperation with the State Revenue Service (SRS). Calculation and disbursement of benefits is a function of the public sector (state and local governments), but in this case it had to be undertaken by the financial sector, hiring staff for this purpose and working on the cost methodology. Support payments affect quite a large number of people – the number of mortgage loans in Latvia exceeds 120,000, and almost 98% of them qualify for the criteria for receiving support.
Bayare points out that many potential borrowers of mortgage loans, including entrepreneurs, postponed the realization of their plans last year, waiting for the European Central Bank (ECB) to start reducing interest rates. Such a decision was made at the beginning of June – after a long period of rising rates, they were reduced by 0.25 percentage points.
Bayare believes that it is reasonable to expect that this year and next year the rates will be reduced further, gradually reaching the 2% limit, but this will happen much more slowly than the multiple rate hikes experienced last year with the aim of limiting inflation.
Most likely, the decrease of 0.25 percentage points has not yet had a significant impact on the rate that people have to pay for loans, however, the trend is positive and encouraging to borrowers, says Bayare. Bank data on activity in the loan market show that interest has returned, for example, “SEB banka” reports that the amount of mortgage loans increased by 39% in the second quarter, “Swedbank” indicates that the amount of loans granted to individuals increased in the second quarter, the total number of individuals with the loan portfolio reaching 2.5 billion euros. Positive trends can also be observed in lending to entrepreneurs, so Bayare admits that 2024 could become a “stepping stone” year for further development.
The head of the FNA emphasizes that banks can and want to lend to both private individuals and entrepreneurs, but in order for lending to grow significantly, the creditworthiness of people and companies is needed, that is, compliance with the requirements set by bank supervisors, as well as by the banks themselves. The relevant situation cannot be solved by the banks alone – this is, for example, the issue of combating the shadow economy and reducing bureaucracy, where FNA expects action from the state.
One of the priority areas of financing in business is the defense and security sector, with which FNA has started cooperation in order to clarify the possibilities of receiving loans. The development of the defense and security industry stems simultaneously from the existential needs of Latvia as a country, but this industry is also economically perspective. Bayare acknowledges that all FNA members have expressed their desire to develop this cooperation, therefore the association is actively trying to develop this cooperation with the industry, including with the active involvement of the state.
Bayare emphasizes that when talking about security, one should not forget about people’s financial security, which is formed from two basic elements – financial literacy and the culture of savings. This summer, FNA launched an anti-phone scam campaign, “Met nost!”, which aims to help residents, with a special focus on the senior audience, recognize and avoid phone scammers. Several members of the industry actively educate citizens and entrepreneurs to improve financial literacy among individuals and entrepreneurs.
Bajare points out that the number of fraud cases has significantly decreased in the last two months, which can be explained both by active public information, the development of bank security solutions, as well as the positive start of cooperation with one of the telephone operators that blocks fraudsters’ calls.
Speaking about savings, Bajāre notes that the second and third level of pensions have become the most important form of long-term savings in Latvia. An important change that came into effect on July 1 – pension capital managers now know who their clients are and can offer investment plans appropriate to people’s age, as well as in general – educate about the formation of savings.
Bayare emphasizes that this is important because the savers themselves often have neither time nor interest in what happens to this savings, so a proactive reminder from the pension manager about how to save more is needed. In the creation of this solution, Bayare notes the positive cooperation of the industry with the state. Bajare predicts that the next pressing matter – allowing people to choose the time when to withdraw the savings of the second level of pension – will also be solved successfully. The head of FNA explains that this innovation is important so that there is no situation when reaching the retirement age coincides with a downturn in the markets and a person has to withdraw money at a loss.
“It must be remembered that every form of business, including the financial sector, involves the balancing and management of various risks. Growing risks and unpredictability always lead to caution, as entrepreneurs try to protect their business, their team’s jobs, their competitiveness. Decision makers should be clearly aware of this, and evaluate new requirements for the financial sector in the context of what we expect from it – affordable, modern and possibly cheaper financial services for all,” says Bajare.
She adds that it can already be observed historically that at certain moments the state and municipalities transfer their functions to the private sector. Currently, there is a lack of provision of social functions, especially in the regions. Bayare points out that the financial sector is ready to consider the possibilities of providing support in the development of the economy in the regions, including the provision of social functions, however, in this case it is also important to understand the needs, as well as to match them with business interests and opportunities.
2024-07-22 14:19:07