Published March 25, 2013
FRANKFURT – Latvia does not expect Russian depositors to pull money out of its banks following Cyprus's bailout, the Baltic state and euro zone aspirant's prime minister was quoted as saying on Monday.
Latvia, where about a third of the population is Russian-speaking, has long positioned itself as an offshore banking centre for its giant neighbor and has seen the share of non-resident deposits in its banks rise in recent years.
Cyprus, which secured a 10-billion-euro bailout from the European Union and the International Monetary Fund early on Monday, was also a favored tax haven for Russians who held sizeable deposits in its crisis-hit banks.
"For the banking sector in Latvia, the situation in Cyprus has no great impact," Latvian prime minister Valdis Dombrovskis told German daily Die Welt.
"We have not offered ourselves as an alternative investment country for money that could leave Cyprus."
Some analysts are worried that the bailout deal, which will impose losses on large depositors in the island's two largest banks, could trigger an exit of foreign money from the euro zone, which Latvia aims to join the euro in 2014.
Dombrovskis said there were no signs that Russian investors are leaving Latvia, adding that Latvian banks which depend more on foreign deposits are regulated accordingly, with stricter rules on liquidity and capital requirements.
Latvia suffered its own crisis after the 2008 global credit crunch, which caused a large bank active with Russian clients to collapse and forced the state to seek an EU/IMF rescue deal.
(Reporting by Sakari Suoninen; Editing by Catherine Evans)