Heads of the banks of Lithuania and Finland to discuss measures for prevention of real estate bubbles
The development of real estate (RE) prices in the Nordic and Baltic countries is uneven, while possible disbalances in one country may have an impact on the financial systems of the other closely interrelated countries in the region. It is planned to discuss this and other relevant issues of financial stability and banking in Helsinki on 25 January at a meeting between the heads of the central banks of Lithuania and Finland.
‘Rapid growth in real estate prices in Sweden and Norway raise concerns for the other countries in the region. Lithuania, having learnt its lesson from the crisis, is one of the first in the region to have implemented measures to limit possibilities for price bubbles to form. We are prepared to share this experience with our neighbours,’ says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
As opposed to the other Nordic and Baltic countries, the financial crisis in essence did not slow down the rise in housing prices in Sweden and Norway — here housing prices continued to rise significantly more rapidly than the income of residents. At the same time, the indebtedness of the residents of the Nordic countries also increased, while the major Scandinavian banks continued to increase their loan portfolios. The financial systems of the Nordic and Baltic countries are very closely interrelated; therefore disbalances in some of the Scandinavian countries could also have an impact on the financial system of other countries, including Lithuania.
During the meeting in Finland, opportunities to minimise rising disbalances, by applying the most appropriate measures in the RE markets of the countries in the region, will be discussed. Already in 2011, the Bank of Lithuania began to apply, and updated last year, the Responsible Lending Regulations, preventing irresponsible lending. At the same time, possibilities for price bubbles to grow are being limited, such as those prior to the crisis, when a fair number of real estate transactions were financed via irresponsible lending and borrowing.
In Finland, which, like Lithuania, is a member of the euro area, experience in participation in the Eurosystem will also be shared; it is planned to discuss the goals of increasing the efficiency of the activities of the national central banks, accountability to the public and transparency. The Bank of Lithuania has implemented one of the largest reorganisations out of all of the EU country central banks and, by constantly improving organisation of its activities, aims to be among the top three most efficient central banks in the Nordic and Baltic region. The Bank of Finland (Suomen Pankki), as is the public sector of this country, is one of the examples of innovative management — for the past decade it has considered efficiency of activities as one of its key principles in organising activities and accountability to the public and has been implementing appropriate management practices.
Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, together with Ingrida Šimonytė, Deputy Chair of the Board of the Bank of Lithuania, and Board Members Marius Jurgilas and Tomas Garbaravičius will participate in the meeting with Erkki Liikanen, Chairman of the Board of Suomen Pankki and the Members of the Board.