We’re not another Cyprus, Latvia says

Latvia Riga.JPG

Eurozone aspirant Latvia, already home to sizeable deposits of Russian money, is not expecting an increase in flows of deposits due to the woes in Cyprus, its bank regulator says.

Latvia, where about one-third of the population is Russian-speaking and which has long positioned itself as an offshore bank centre for its big neighbour, has seen the share of non-resident deposits in its banks rise in recent years.

But Kristaps Zakulis, head of the FKTK financial sector regulator, said on Thursday (21 March) he saw no new rush of funds due to troubles in Cyprus, home to large amounts of Russian offshore funds and struggling to strike a deal for a eurozone bailout.

"There is no basis to expectations that a large flow of money from unknown sources will come in the next few days into the Latvian financial sector," he said in a statement.

"In the same way, there is no truth in statements that Latvia could become Cyprus number two as the size of both countries' financial sectors and their significance to the economy are very different," he added.

The European Central Bank has given Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its banks.

Parliament had earlier thrown out a tax on bank deposits, many of them held by Russians.

Latvia, hoping to adopt the euro next year, had its own deep crisis after the 2008 global credit crunch, which caused a large bank, which was also active with Russian clients, to collapse and forced the state into a bailout led by the International Monetary Fund and EU.

The country has since begun a recovery from the crisis, which saw the economy contract by nearly a quarter.

Latvia says the banks which service non-residents are tightly supervised and have to have plenty of liquid funds on hand in case of a sudden withdrawal of funds.

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