The loan portfolio of Latvian commercial banks, when measured against the size of the economy, has been steadily shrinking since the 2009 financial crisis. In the initial post-crisis years, this seemed logical, as borrowers needed to reduce disproportionately high debt obligations. However, the continuation of this trend in recent years raises more and more questions. The volume of loans issued to households and businesses is currently among the lowest in Europe – 36% of gross domestic product (GDP). In this regard, among European Union (EU) countries, we are only slightly ahead of Hungary and Romania, and overall, such performance would be characteristic of a country with an underdeveloped banking sector, which Latvia is certainly not (the EU average is significantly higher – 94%).