The increase in interest rates on loans most likely will not have an immediate negative impact, but it is possible that bank customers are more cautious about taking out new loans, representatives of “OP Corporate Bank” admitted in an interview.
The director of the Latvian branch of “OP Corporate Bank” Elmārs Prikšāns stressed that banks in Latvia have currently attracted more deposits than they have lent out.
“This means that both individuals and companies have been relatively cautious in making new commitments. It also means that corporate balance sheets are stronger and we don’t see an immediate negative impact. This is especially true for large companies, with which our bank works in the Latvian market,” said Prikšāns.
The president and CEO of the Finnish financial group “OP Financial Group”, Timo Ritakallio, further said that the current level of interest rates does not create problems for bank customers – be they households or companies – and there are no visible complications with the repayment loan.
“At the same time, if the interest rate level rises significantly, it can become a challenge, especially for those customers who have a lot of credit,” Ritakallio admitted.
He also predicted that rising interest rates and a recession in the economy would mean demand for credit and investment services would decrease. However, it shouldn’t be a dramatically large volume.
Ritakallio also recalled that current credit interest rates are still very moderate compared to historical levels.
According to him, deposits, on the contrary, could become more attractive. “It is also very important that it is clearly visible in the financial markets that the assets in them are currently much more expensive than some time ago. This also makes deposits much more attractive in the eyes of banks and can contribute to higher interest rates on deposits,” OP Financial Group said. President.
At the same time, Prikšans added that a lot will depend on how big the demand for deposits will be. “Future rates are currently very difficult to predict, but they will definitely be positive and banks have already started paying deposits and will continue to pay, just as they have in the past,” he said.
