Today the Saeima (the Parliament) adopted the new Law on Latvijas Banka in its third, final reading. The Law provides for the integration of Latvijas Banka and the Financial and Capital Market Comission (FCMC) to become a single institution as of 2023.
"Thanks to the active engagement and successful cooperation of all the stakeholders, we have completed an important task for the merged institution to become operational and supervise and develop the financial sector even more effectively. The merger of the FCMC and Latvijas Banka also involves potential long-term benefits in the form of economy of resources. This step will reduce bureaucracy and costs and promote the ability to respond promptly to changes in the market," highlighted Jānis Reirs, the Minister for Finance.
For several months, Latvijas Banka and the FCMC, with the Saeima's conceptual support of the idea, have been carrying out the necessary preparations to ensure that the integration process is well-considered, successful and in line with the interests of the public and financial industry. This process is gathering momentum in order to complete all preparations and enable the merged institution to start its work on 1 January 2023, ensuring professional and effective implementation of the functions of Latvijas Banka and the FCMC.
"I would like to thank my colleagues at the Ministry of Finance, the FCMC, the European Central Bank and Latvijas Banka who took part in drafting the new Law, as well as the Saeima and its Budget and Finance (Taxation) Committee in charge of this issue for the smooth and constructive progression of the draft Law. Very valuable and huge work is now complete, and we can be proud of a really modern law of the central bank. There are several practical tasks going forward; of them, a successful integration of Latvijas Banka and the FCMC will be the most profound one," says Mārtiņš Kazāks, Governor of Latvijas Banka.
Santa Purgaile, Chairwoman of the FCMC: "A common task of the stakeholders involved in the integration process of Latvijas Banka and the FCMC is to ensure that the supervision of the financial sector and capital market of Latvia continues in a responsible and professional manner. We see this integration process as an opportunity to join our efforts and become an effective and strong supervisor working diligently to promote the financial sector development in Latvia. Our current accomplishments to prepare for the integration process serve as a signal that the goal will be achieved and will provide value added to the general public and the Latvian economy."
Currently, active work is ongoing on the development of the integrated institution's structure, providing for the segregation of the monetary policy and supervisory functions. The preliminary technical work for merging both institutions has also started, inter alia the Integration Project Committee comprising representatives from both Latvijas Banka and the FCMC has commenced its work.
The new Law on Latvijas Banka establishes the integrated institution's operational principles, tasks and governance framework, as well as its role in implementing the macroprudential policy. The Law provides for the integration of the FCMC with Latvijas Banka, respecting the independence of its monetary policy functions and the functions of the finance and capital market supervision and resolution authority.
The feasibility study carried out last year concluded that the integration of both institutions will enable more effective supervision and development of the financial sector in the future. This small step will reduce bureaucracy and costs and promote the ability to respond promptly to changes in the market. The feasibility study also concluded that integration would result in an economy of resources in the long term.