2013-12-05
Financial institutions' perception of risks to Lithuania's financial system is more moderate
For the financial institutions operating in Lithuania the highest concerns stem from foreign markets-related threats, shows the latest survey of risks to Lithuania's financial system, conducted on behalf of the Bank of Lithuania. However, the respondents' perception of nearly all risks is more favourable than it was at the beginning of the year.
"Financial institutions are more concerned about external sources of risk, while their assessment of internal threats is more moderate. For instance, with the improvement of the financial situation of corporates and households, banks perceived credit risk more favourably than before. However, financial institutions believe that their possibilities to attract funding will aggravate," says Marius Jurgilas, Member of the Board of the Bank of Lithuania.
Financial market participants operating in Lithuania consider the likely impact of sovereign debt issues in some countries on the Lithuanian economy and a decline in domestic exports as a result of weaker growth of the global economy as the most relevant risks. In the opinion of the surveyed, investment diversification and export expansion into "healty" destinations would mitigate the effects of the above risks.
As compared to the similar survey conducted half a year ago, more focus was devoted to the the threat of losing the country's competitiveness. According to the surveyed respondents, wage growth outpacing labour efficiency and the lack of adequately qualified staff may lead to the loss of the country's competitiveness in foreign markets. Nevertheless, the probability of manifestation of this risk is perceived as low.
Asked to indicate more of potential sources of risk, the surveyed financial institutions noted the lack of political will in Lithuania in taking decisions of relevance to the economy and finances, instability of the tax environment. Furthermore, the financial institutions indicated the current situation in Russia, Ukraine and Belarus as a source of increased risk.
Macroeconomic risk has been perceived as lower than medium for a second half-year in a row, despite its perception in late 2012 as higher than medium. The assessment by part of the surveyed financial institutions of the macroeconomic situation would be more favourable if they saw clear actions for reducing budget deficit and streamlining the tax environment.
The financial institutions still assess conservatively their tendency to assume risk, i.e.to seek higher returns in choosing more profitable, but riskier projects, and are not going to change their view in the upcoming six months.
The full Survey of Risks to Lithuania's Financial System (367.1 KB download icon) is available on the Bank of Lithuania website.