Among others, SBP will be seeking for removal of structural distortions facing the banking sector that has resulted in suboptimal pricing regime for the depositor and borrowers. A major competitive force for banks would however involve a financial sector wide campaign to stimulate the equity and debt markets so that banks compete effectively with their competitor institutions.
For example, if the lats had been pegged to the euro already at the beginning of this year, then in the time period between January and October its exchange rate against the US dollar would have increased not only by 0.4% as it in fact did (Fig. 6-7*) but by 1.1%.