Latvia's economy is becoming too small for such a large number of banks, said Finance and Capital Market Commission's (FKTK) chairman Peteris Putnins in an interview with Latvia's Neatkariga daily, commenting on the decision of Nordea and DNB Banka to merge their Baltic business and register it in Estonia, writes LETA.

One of the reasons is optimization of costs. In my opinion, that is the main reason. Shareholders will not change. It will be a bank with a considerable size of assets in Latvia. Supervision of the bank will be conducted in cooperation with the Estonian watchdogs," said Putnins.

He also reminded that the merger has not been completed yet. The banks have just announced their plans, but the merger still needs approval of several institutions, including the FKTK.

"Latvia's economy is becoming too small for such a large number of banks. It is not just a problem of the financial sector, but the whole economy," he said.

As reported, Nordea and DNB announced they have entered into an agreement to combine their operations in Estonia, Latvia and Lithuania to create a main bank in the Baltics where both will have equal voting rights but different ownership levels. The new bank will be registered in Estonia and have branches in Latvia and Lithuania.





It has been estimated that the new financial institution to be established as a result of a merger of the Baltic businesses of DNB and Nordea will be the second biggest player in the Baltic states.