Banking sector is one of the most developed sectors of Latvian economy and the important contributor to GDP. The global financial turmoil has had large negative effects on the national economy as a whole and, in particular, on performance results of Latvian commercial banks. The goal of the paper is (i) to evaluate the current situation with banking, (ii) to analyze the reasons of its occurrence, and (iii) based on statistics, to predict the further development of Latvian banking sector. The authors of the paper conducted benchmarking study, comparing the key performance indicators of Latvian commercial banks over the last two years. The received results indicate a liquidity problem and loan portfolio impairment. Many of Latvian banks should look for foreign investors to cope with the problems Thus, the new wave of financial sector consolidation is expected.