(Bloomberg) -- Latvia’s parliament will consider legislation to force banks to cut interest rates on mortgages by 50% for one year, due to higher costs to borrowers where almost all loans have variable rate.
The budget committee will next week send the legislation to the Baltic country’s parliament, where it will need three readings before it would become law. The legislation applies to people with only one mortgage with a value of €250,000 ($262,000) and lower.
The Baltic country’s financial sector — dominated by Nordic lenders such as Swedbank AB and SEB AB — has seen profits rise as about 95% of housing and non-financial corporate loans have floating rates, boosting banks’ net interest income. Latvia’s central bank and government have repeatedly called on the banks to consider lowering the cost of servicing the mortgages.
“At the moment the budget committee is confrontational” on the issue of mortgages, Prime Minister Evika Silina said on Wednesday. “I hope that the banks will be able to organize among themselves and find a good way to make an offer to their borrowers.”
The news comes as the calls for measures to curb bank profits grow louder across much of Europe. Neighboring Estonia’s government last month agreed with mainly Nordic-owned banks to increase dividend payments — and thereby taxes on dividends — rather than imposing a direct levy.
In Sweden, the second largest party in parliament earlier on Wednesday said it had effectively blocked a proposal by opposition Social Democrats to impose a temporary tax on the profits of the country’s banks.
Read More: Swedish Banks Tax Proposal Blocked by Second Biggest Party
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