Financial environment

Institutional Framework

Latvia's central bank — the Bank of Latvia, is an independent financial institution, whose main goal is to implement and maintain a conservative and consistent monetary policy, to ensure a stable and predictable financial environment in the country. The Latvian bank supervision system corresponds to the requirements of EU directives and Basic Core Principles on Effective Banking Supervision, and has been evaluated by a number of foreign experts as one of the strictest in the CEEC. As of 1 January 2005, the national currency – the Latvian ‘lats (LVL) has been pegged to the Euro at the rate 1 EUR = 0.702804 LVL. The re-pegging from SDR to EUR was done in order to achieve the key objective of facilitating a favourable macroeconomic environment for the growth of the national economy in the long term, as well as to successfully join the EMU.

The supervision function over financial service providers (banks, insurance companies, stock exchanges) is discharged by the Financial and Capital Markets Commission, which was established to protect the interests of investors, depositors and insured individuals and entities.

Additional information:
www.bank.lv 
www.fktk.lv 

Banking Sector 

	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
Аssets	4934	6050	7119	8374	10994	15566	22633	31184	33072	30846
Resident Loans	1586	2415	3032	3772	5316	9901	11037	14484	13887	13588
Resident Deposits	1488	1883	2167	2459	3161	8827	15471	21224	23604	21954

Source: The Financial and Capital Markets Commission

The number of commercial banks operating in Latvia exceeds twenty (at the end of 2009) 21 banks and 8 branches of foreign, and 34 credit unions were registered), which ensures a good choice in banking services.
A number of foreign investors, including SEB (Sweden); DnB Nord (Denmark); Nordea (Finland), Bank Austria Creditanstalt (Austria) operate and together constitute approximately 60% of the commercial bank capital in the country, bringing additional stability and customer security to the Latvian market. Only 8–10 banks operate as full-range banking service providers to both private and corporate customers. All the others have positioned themselves in certain niche markets with specialised services. In addition to an extensive network of ATM terminals, a number of banks also provide Internet banking and/or mobile banking services to their customers. The most popular brands of credit/payment cards in Latvia are Visa/Visa Electron and MasterCard/Maestro, however, most internationally used cards are accepted by banks and ATMs in Latvia.

Additional corporate business services provided by commercial banks in Latvia include mergers & acquisitions, business advisory and privatisation advisory.

The banking sector is still growing steadily, mainly because of additional investment and high profit margins, which are being achieved as a result of relatively high, albeit decreasing loan interest rates.

Additional information at:
www.bank.lv 
www.bankasoc.lv
www.fktk.lv
www.kreditiem.lv  

Insurance

Apart from personal life insurance, the insurance industry is relatively new to Latvian consumers and companies. In 2008, the Latvian market for insurance services increased for 19% compared with the previous year. Currently, the leading insurance services are transport, car owners' compulsory liability, health and property, although a number of insurance companies also offer other services covering freight, loans and guaranties, and losses.

Further growth and diversification of corporate insurance services is expected to develop with the overall growth in economic activity. In total, 14 insurance companies were active in Latvia at the end of 2009 and constituted 2% of the total national financial system assets. Around half of the total insurance industry stock capital comprises foreign investment, including from internationally known names like ERGO (Germany) and Sampo (Finland).

Additional information at:
www.fktk.lv 


The Stock Exchange

The NASDAQ OMX Riga is the Latvia’s sole regulated market organiser. Although relatively small compared to mature EU stock markets, at the end of 2009 market capitalisation stood at EUR 1.3 billion, with 36 companies listed. The NASDAQ OMX Riga is 93% owned by OMX Group (Finland, Sweden and Denmark), who run 80% of Nordic and Baltic equity markets. NASDAQ OMX Riga is sharing the SAXESS trading platform with 5 other markets within the OMX Group, and two other Nordic stock exchanges. This has encouraged new memberships and more investor interest.

Additional information at:
www.nasdaqomxbaltic.com