Yesterday, the European Commission (EC) and the IMF issued a joint statement welcoming the financial commitments made by the parent banks of the four largest foreign-owned banks in Latvia during the European Bank Coordination Meeting for Latvia held in Stockholm last Friday. During the Coordination Meeting the parent banks (DnB Nord, Nordea, SEB and Swedbank) “reaffirmed their commitments to support their branches and subsidiaries in [Latvia] and to promote financial stability in the Baltic region.” The Coordination Meeting was co-chaired by the EC and the IMF, with the World Bank Group, the European Bank for Reconstruction and Development, the European Investment Bank, the International Finance Corporation, the Bank of Latvia, the Financial and Capital Markets Commission of Latvia, the Ministry of Finance of Latvia, home country authorities (Denmark, Finland, Norway and Sweden), and the European Central Bank in attendance.

The four banks issued a Concluding Statement in which they collectively agreed upon “the principles of maintaining their overall exposure to the country and meeting liquidity and capital needs of their branches and subsidiaries in Latvia.” The banks also agreed to “continue close cooperation and regular dialogue with a view to making progress towards more specific bilateral commitments to supervisory authorities.” The Latvian government anticipates that these commitment along with continued international financial support, will help the “banking system weather the current crisis better and return the economy to a robust growth path.”

In December 2008, the IMF, the EU and other bilateral and multilateral donors granted the Latvian government an international financial support package totaling €7.5 billion. These commitments, together with the financial support that the Latvian government has already received, will help “cushion the effects of the economic downturn, strengthen investor confidence, and help Latvia return to sustainable growth.” The success of the reform program, however, depends “significantly on the continued involvement of all banks operating in or with Latvia, including foreign-owned banks.”