Share of high-risk clients in Latvian banking sector dwindling: PM

RIGA, April 5 (Xinhua) -- The share of high-risk clients in the Latvian banking sector is quickly dropping, and by now, the percentage of shell companies among bank clients is down to 30 percent, Latvian Prime Minister Maris Kucinskis said on public radio Thursday.

Latvian authorities are taking steps to clean up the national banking sector after the Baltic country's third largest bank by assets, ABLV Bank, had to cease operations in February.

This followed a report by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury, which accused the Latvian bank of involvement in money-laundering schemes and bribing Latvian officials.

Although giving up high-risk nonresident business is likely to affect both the banking sector and the Latvian economy in general, "we will get over it", Kucinskis said, adding that the likely economic impact from the banking sector's clean-up is currently being estimated at around 0.5 percent of GDP.

The prime minister said that only a few years ago shell companies made up around 60 percent of the Latvian banks' clients. When the government started considering a ban on shell companies after ABLV Bank's failure earlier this year, the share of such bank clients had already contracted to 40 percent, and the latest statistics show that the figure has now dropped below 30 percent already.

Kucinskis noted that the proportion of high-risk clients is being reduced in the Latvian banks not just because of ABLV Bank's troubles but also because the government's position "that we are winding up this business has been heard".

Next week, the Latvian government plans to adopt legislative amendments that would prohibit banks from doing business with shell companies, which are seen as high-risk entities prone to involvement in various illicit schemes, including tax fraud and money-laundering.

Sanda Liepina, head of the Association of Latvian Commercial Banks, said in an interview with public television Thursday that the banks are regrouping and overhauling their business to meet the new, stricter requirements, and that most of the reforms are being implemented not because of the change of regulations but thanks to oversight and the banking regulator's calls for action. Enditem