It takes two to tango

15 October 2009 By Constantine Courcoulas

Swedish banks are aghast at Latvia s proposals to limit mortgage repayments to current property values. But the scheme could make devaluation more acceptable to Latvians. And a devaluationcap combination has a rough justice. Everyone was foolish and everyone will suffer.

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The Latvian government led by Valdis Dombrovskis, the prime minister, confirmed on October 13 that it was drafting legislation that would cap the amount banks could collect to the current value of properties rather than the value of the loan.

Thomas Backteman, vicepresident of corporate affairs for Swedbank, said the Latvian proposals would deeply violate European law and cause a reevaluation of operations there.

If these proposals go through, it would be very difficult for us to continue lending in the [Latvian] mortgage market, he said.

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