Financial environment

Central bank and the commercial bank sector

The central institution of Latvia’s financial environment is the Bank of Latvia – Latvia’s central bank. According to the Law on the Bank of Latvia, the bank’s main goal is to execute Latvia’s monetary policy and to maintain price stability nationally. The Bank of Latvia also ensures the operation of the Credit Register. The bank grants legal persons registered in the Enterprise Register (except credit institutions) licences for the purchasing and selling of foreign currency in the form of business activities and controls compliance with its established procedures for purchasing and selling foreign currency .

With the intention of becoming a fully-fledged member of the Economic and Monetary Union and to introduce the euro as the national currency, Latvia has pegged its national currency – the Latvian lats (LVL) – to the euro (rate - EUR 1 = LVL 0.702804).

Financial and capital markets are regulated by the Financial and Capital Market Commission (FCMC), established in 2000 to sustain stability and development, and to promote free competition within financial markets. The FCMC has the authority to monitor and regulate all participants in financial and capital markets (investors, credit institutions, insurers, stock exchanges, depositories, brokers, etc.).

More than 20 commercial banks and 9 branches of foreign banks operate in Latvia with total assets of approximately LVL 21 billion (2010). Latvia’s largest banks represent foreign investors from Sweden (Swedbank, SEB), Finland (Nordea Bank) and Germany (DnB Nord Banka) who make up more than 50% of market share in total assets and account for approximately 64% of issued loans (2009). Only a few of the largest Latvian banks operate as universal credit institutions providing the full range of banking services to private individuals and corporate entities with extensive networks of local branches and ATM terminals. Most banks provide a limited range of services to specific customer groups.

Insurance sector

At the end of 2009, 14 insurance companies were operating in Latvia – four life insurance companies and ten non-life insurance companies, as well as eleven branches of foreign insurance companies. The provision of insurance services and insurance company operations are regulated by the Law on Insurance Companies and the Supervision Thereof.

Stock exchange

The leading institutions operating the securities market in Latvia are NASDAQ OMX Riga and the Latvian Central Depository. Through these two enterprises, market participants are provided with an environment for carrying out transactions with securities, the clearing and settlement of securities’ transactions, listing of securities, operating of a central public securities register and a funded pension-fund register. NASDAQ OMX Riga is a part of the NASDAQ OMX Group, Inc., which is the world’s largest exchange company. At the end of 2009, NASDAQ OMX Riga listed 35 companies with total market capitalisation of LVL 925.56 million. According to the provisions stipulated by the Financial Instrument Market Law and the rules of NASDAQ OMX Riga, companies that are interested in listing their shares on the main list of NASDAQ OMX Latvian market must meet certain requirements:

• prospectus approved by the Latvian supervisory authority;
• at least EUR 4 million market capitalisation;
• at least 3 years of operation;
• must list at least 25% of share capital;
• financial statements prepared according to IFRS or GAAP standards.

Additional information at:
www.bank.lv
www.nasdaqomxbaltic.com
www.fktk.lv
www.laa.lv