On Thursday, 23 September, Latvia’s Saeima passed in the final reading the new Law on the Bank of Latvia, as well as an accompanying package of amendments. The proposed changes provided for merging the Finance and Capital Market Commission (FKTK) and the Bank of Latvia.
Amendments were added to 18 laws. One law was developed from the ground up.
The new Law on the Bank of Latvia was developed to establish a framework for the Bank of Latvia after its merge with FKTK with respect of the monetary policy, as well as monitoring of the finance and capital market.
The governor of the Bank of Latvia Mārtiņš Kazāks told Saeima deputies at a previous meeting of the Budget and Finance Committee that a merge of the country’s central financial institution and capital sector’s supervisory institution would yield multiple benefits. This includes an exchange of knowledge and experience between employees of both institutions, as well as contribute to financial stability and reduce systemic risks.
On top of that, administrative procedures, the level of bureaucracy and different operational costs will reduce, said Kazāks.
The governor of the central bank also said the new law provides a clear picture of the bank’s operations and duties, as well as includes a sustainable development goal for the financial market. The legislative draft also includes a modern central bank mandate in the area of cash availability.
Kazāks also stressed that the new law details a modern central bank’s mandate in the area of payment system, regulations for emergency liquidity aid, complete framework in the area of statistics, regulations for information security and a modern framework for parliamentary monitoring.
The new Law on the Bank of Latvia provides clear principles for the bank’s operations.
The new law also outline’s the competence of the Bank of Latvia and the necessary legal instruments for the administration of the finance market and its participants.
Representatives of the Bank of Latvia affirm that for the past several months the bank and FKTK have been implementing preparations to make the integration process as smooth as possible.
This process will continue more actively now to make the necessary preparations and so that the new institution is able to commence operations 1 January 2023.
«I would like to thank both our colleagues in the Ministry of Finance, FKTK, European Central Bank and the Bank of Latvia participating in the development of the new law and the Saeima for quick and constructive development process. We have done a lot and we can be proud of a truly modern central bank law. Now we have multiple practical tasks ahead of us. The biggest one is the successful integration of the Bank of Latvia and FKTK,» stresses Kazāks.
FKTK chairman Santa Purgaile reports the shared objective of the Bank of Latvia and FKTK is making sure the monitoring of Latvia’s financial sector is performed responsibly and professionally.
BNN previously reported that the European Central Bank provided a positive report in regards to the planned changes on 26 February 2021.
The legislative draft was developed based on the assessment performed in spring 2020.
«Benefit and risk analysis affirmed that the merge of FKTK and the Bank of Latvia makes sense because it would provide public benefits. The synergy of information and competences will help assess risks in financial institutions in more detail, which would prompt more active, reasonable and more focused problem-solving decisions,» the Ministry of Finance previously reported.
The governor of the Bank of Latvia had previously said that in the event of a positive decision from the Saeima it will be possible to implement the integration process more smoothly and accurately so that the new institution is able to commence operations in as early as 1 January 2023.
Final reading. FKTK and the Bank of Latvia will be merged
