CC: Competition in Latvia's banking sector remains weak, dominated by four major banks

The Competition Council (CC) has concluded after a market monitoring that competition in several key segments of Latvia's credit institution sector remains limited. A few large players dominate the market, and customer mobility between banks is low, reducing consumers' ability to influence market participants' behavior and foster competition.

There are 14 credit institutions and branches of foreign banks operating in Latvia authorized to accept deposits and issue loans. However, in retail banking, the market structure is largely determined by four major banks: Swedbank, SEB banka, Luminor, and Citadele. Their combined market share is particularly high in household deposits, mortgage lending, and consumer credit. In the mortgage segment, these banks cover nearly the entire market.

A positive development is the entry of a new player – INDEXO Banka – in 2024, which may increase competitive pressure. The market monitoring identified high entry barriers, including strict regulatory requirements, substantial costs, and resources needed to start and expand operations. However, the CC notes that these barriers are not unjustified as they are linked to financial stability and depositor protection.

Customer mobility is hindered by difficulties in comparing offers and the perception that switching banks is complicated and time-consuming. Although most customers are satisfied with their primary bank, switching to another provider is rare. The CC observed that mortgage borrowers more often negotiate a lower interest rate with their existing bank rather than transferring the loan. However, when loans are transferred, the benefit in interest rate reduction is usually greater.

To promote competition, the CC has called on the Bank of Latvia, in cooperation with the Consumer Rights Protection Centre and banks, to evaluate solutions that improve the comparability and transparency of offers. According to the CC, easily understandable and standardized information on prices and terms would foster informed choices and strengthen competitive pressure. The CC also urged the legislator to assess the impact of new taxes and financial measures on competition before implementation, as frequent regulatory changes could make the Latvian market less attractive to potential new entrants and investors.

The CC completed information collection for the market monitoring in September 2025, so issues raised after that period have not been substantively evaluated.