Greater competition in the banking sector is essential if companies are to have access to finance. This was declared by European Commission Executive Vice President Valdis Dombrovskis at the opening of a conference, “Towards a Better Future. Financing a Better Future: The Vital Role of Finance in Achieving Sustainable Growth.”
Dombrovskis pointed out that that companies in Europe mostly get financing from banks, but bank loans are often insufficient or difficult to obtain. This, he said, is particularly true among new and innovative companies, which then need to find other resources of finance to grow.
The vice president added that this is a particular problem in smaller countries such as Latvia, where access to finance is limited companies often reduce their growth ambitions, and this, in turn, hinders the development of the Latvian economy.
He also described reasons for slowness in the lending world. Interest rates on loans in Latvia and the other Baltic States are among the highest in the euro zone, and the situation is only exacerbated by limited competition in the Latvian credit market.
During the first quarter of 2024, the share of loans to non-financial corporations and households amounted to only 27.5% of Latvia’s gross domestic product,” Dombrovskis said. “In the euro zone, the figure is 78.9%.”
Thus, the official argued, more competition is essential to increase corporate access to finance, adding that promoting a single market for financial services would make it easier for domestic companies to access capital markets and various forms of financing, not just in their own countries, but also internationally. “This, of course, is one of the key objectives of the Capital Market Union, and its competition will be a priority for the next European Commission,” Dombrovskis promised.
Regional initiatives could also help he added, noting that the creation of a common market infrastructure in the Baltic States has been a real “trailblazer” toward the broader integration of capital markets in the EU.
Source: BNS
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