The number of creditors determines the dominance of the banking sector
It has to be said that not only the predominance of the number of creditors determines the dominance of the banking sector, but also all other indicators that we will look at below. In 2013, creditors of the Latvian banking sector or Latvian commercial banks issued loans or the value of their loan portfolio was 15 618 219 thousand euros, but the creditors of the Latvian banking sector issued them 348 347 thousand euros.
Another source of information suggests that creditors in the banking sector issued 94% of total consumer credit, while the remaining 6% of total consumer credit was provided by non-bank creditors. Similarly, with regard to loans to households, 99% of total loans were issued by Latvian commercial banks, while the remaining 1% of total loans to households were provided by non-bank creditors.
It has to be said that the profit of the banking sector
Naturally with the previous indicators, is considerably higher than it is for the non-bank sector, namely EUR 246.2 million and EUR 38.4 million. However, there are two indicators that do not count in the banking sector over the banking sector, but in these cases the size of these indicators is not positive.
One of these indicators is the number of credit defaultors – 19.9% of the banking sector’s clients had difficulty repaying loans to the loan portfolio, while in the non-bank sector there were 22% of late payments.
It is logical that the prevalence of delays is not positive – it is not so much related to the shortcomings of consumers as to the shortcomings of lenders. One of the drawbacks that can lead to an increase in the number of arrears is the second indicator that is higher in the non-bank sector than in the banking sector, namely the annual APR.
In the non-banking sector
The LPG for services is significantly higher than the LPG for banking services (several hundred percent against a few tens of percent), making it difficult to make timely and complete credit payments.
These huge differences are due to the fact that non-bank services are short-term services, while banking services are long-term services, but the APRs are both calculated using the formula for calculating the long-term service GPL.