ANALYSIS OF THE QUALITY AND PROFITABILITY OF ASSETS IN THE BANKING SYSTEM AND THE IMPACT OF MACROECONOMIC FACTORS ON ITS STABILITY- CASE OF LATVIA

The problems with commercial bank stability are related to macroeconomics, the policy of the central bank and government as well as with the finance management of the specific commercial bank. The commerce bank system is in continuous development and interaction with the external environment, its operations must not be separated from the economic operations in the particular country. The crisis in 2008 – 2010 demonstrated the problems of Latvian commercial banks which could have been averted by thoughtful control of the economic situation by commercial banks and supervisory institutions as well as control of asset quality and profitability. The purpose of this paper is to:  Research the influence of macroeconomic factors on the stability of commercial bank system as well as the profitability and quality of commercial bank assets using a systematic approach;  Give practical recommendations to commercial banks and their supervisory institutions – regularly analyse and evaluate these influencing factors and the quality and profitability of commercial bank assets to ensure real stability of the commercial bank system. In developing this paper authors used various research methods like quantitative and qualitative methods of economic science including comparative analysis and synthesis, graphical illustration methods.