Sweden's fourth-biggest bank Swedbank will continue to support business in the troubled Baltics despite warnings from Sweden’s Finance Minister.

A war of words has escalated between Sweden’s Finance Minsiter Anders Borg and Latvian Prime Minister Valdis Dombrovskis. Anders Borg said Latvia wasn’t doing enough to fix its ailing economy. In response Valdis Dombrovskis accused the Swedish minister of being “rude” and of trying to interfere with Latvia’s political course.

The economic recession in the Baltic States is a growing headache for Swedish banks that have lend hundreds of million of kronor to the crisis-hit states.

Still, Swedbank, the largest bank in the Baltic region with some 40 percent of Latvia’s population of 2.3 million people as customers, said it had no plans to abandon the market.

"We are in the Baltics long-term and we have no intention of withdrawing," Swedbank's head of Baltic banking, Håkan Berg, told Dow Jones Newswires.

Swedbank will focus its lending on solid businesses and scale back on start-ups that the bank feel are better supported by private equity investments.

The bank will also continue to offer real-estate loans even though the sector is risky.

Anders Borg said that international lenders were losing patience with Latvia, that the country must hike its budget cuts and fulfill the loan terms to receive the agreed $1.4 billion in Nordic payments before the turn of the year. The Swedish minister’s comments sparked new speculation that Latvia may be forced to devalue its euro-pegged currency.

Although Swedbank doesn't expect a Latvian devaluation it’s nevertheless braced for the surge in loan-losses it would trigger.

"We have no reason to question the IMF-program, but, of course, we also need to be prepared for alternative types of scenarios," Håkan Bergtold Dow Jones.