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"Moody's" warns about rising non-residential deposit levels in Latvian banking system

 LONDON, May 2 - Rising levels of non-residential deposits within the Latvian banking system are credit negative, "Moody's Investors Service" warns in a comment published today.

The agency says that the negative pressure arises from the fact that deposits are the main funding source for Latvian banks, particularly for banks that lack parental funding; and the rating agency's view that non-resident deposits (currently 49 percent of total deposits at end-2012) are inherently less stable than their resident counterparts.

Non-resident business is driven by events in both the host banking system and in the non-resident's home nation, and although not uniformly distributed across the banks, levels have increased in recent years. "Moody's" says that the increase in these deposit levels are mainly due to the recovery of the Latvian economy and the problems within some rival systems.
At the same time, these deposits (mainly from the CIS countries) have played a significant role in the Latvian banking system since the conclusion of European Union accession negotiations at the European Council (Copenhagen) in December 2002.

"Moody's" says that non-resident deposits pose additional risks because they introduce extra complexity into the banking system that further challenges system-wide stability.

"Moody's" warns about rising non-residential deposit levels in Latvian banking system.
leta.lv
02-05-2013
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