How to obtain authorisation?

Preparation for the submission of application: an introductory stage, during which Latvijas Banka organises a meeting with an entrepreneur to discuss its planned activities. At this stage, the credit institution does not necessarily have to be established yet.

What does the entrepreneur do?

• Prepares information on potential shareholders and officials.
• Prepares general information on envisaged amount of capital and the origin of funds.
• Prepares the draft business plan according to requirements of the European Commission (EC) Regulatory Standards.
• Starts drafting necessary documents.

What does Latvijas Banka do?

• Provides advice regarding the applicable regulatory framework.
• Explains the process of document review and decision-making process and deadlines within Latvijas Banka and ECB.
• Explains the cooperation process between the entrepreneur and Latvijas Banka.
• Carries out an assessment of the initial business plan and procedures.
• Assesses viability of the envisaged business project and whether the authorisation process can be continued.
• Provides advice on documents to be submitted.

What should be taken into account?

• Please refer carefully to the regulatory requirements.
• Assess the need to attract qualified experts or consultants.

Documents to be submitted:

• the CVs of potential officials, filled in the FAP questionnaire;
• the CVs of 20 largest shareholders, information on amounts of financing, origins of these funds;
• general information on the type of planned capital financing and the origin of funds, information; on financial stability (summary of assets and liabilities), information on wealth;
• the daft of business plan.

Costs

Preparation of the application for the submission and provision of advice by Latvijas Banka are free of charge.

Submission of the application: An entrepreneur prepares and submits the application for authorisation.

What does the entrepreneur do?

• Submits fully completed application and all necessary information according to:
  1. Provisions of Chapter 2 of Credit Institution Law.
  2. Provisions of FCMC Regulations No 200 of 27.10.2020 Procedures of Submission the Information and Documents for Obtaining Licence, Permits and Confirmations Regulating the Operation of Credit Institutions and for the Provision of Information (Licencing Regulations).
  3. Provisions of FCMC Regulations No 92 of 14.07.2020 List of Information Required for Notification of the Acquisition or Increase of a Qualifying Holding and General Principles and Procedure for the Examination of Notification (Shareholders Regulations).
  4. Provisions of FCMC Regulations No 94 of 14.07.2020 Regulation on the Assessment of the Suitability of the Executive and Supervisory Board Members and Key Function Holders (Officials Regulations).
  5. Provisions of FCMC Regulations No 227 of 01.12.2020 Regulation on Establishment of the Internal Control System.
• Receives information from Latvijas Banka regarding starting the examination of the application for authorisation or on deficiencies to be addressed in the submitted application.
• Provides the necessary additional explanations.

What does Latvijas Banka do?

• Carries out an assessment of the completeness of the application within one month. The final deadline depends on the ECB assessment of completeness of the file (the assessment of the application as to the substance is not yet ongoing).
• If the application is incomplete, Latvijas Banka sends a letter to the entrepreneur indicating the deficiencies identified which need to be addressed.
• If the application is complete, Latvijas Banka sends a letter to the entrepreneur informing that the assessment of the application for authorisation is started.
• Latvijas Banka designates the project manager and gives the entrepreneur access to the project management tool, which will help to follow the process.

What should be taken into account?

• Before submitting the application, please apply for advice offered by Latvijas Banka experts.
• Make certain that the documents to be submitted are complete and of high-quality.
• Latvijas Banka invites the entrepreneur to get acquainted with EBA Guidelines on a common assessment methodology for granting authorisation as a credit institution according to requirements under Article 8(5) of Directive 2013/36/EU. It will help you to understand how the supervisor assesses your application.
• !!! The entrepreneur should take into account that the opinion on granularity of completeness of the file can differ between Latvijas Banka and ECB.
• Make certain that all documents are submitted.

List of documents to be submitted

As each of a founder of a credit institution is unique and a credit institution seeks for its own special niche in the market, the list of documents to be submitted together with the application differs due to the specific business model of each credit institution. Nevertheless, at the base there are common principles and documents that can be divided in five core groups afterwards adjusted to the entrepreneur’s business model.

The authorized person of credit institution founders submits an application for authorisation.

The application is accompanied by:

Foundation documents

1) Section 15, 16, 17 of Credit Institution Law

2) Provisions of FCMC Regulations No 200 of 27.10.2020 Procedures of Submission the Information and Documents for Obtaining Licence, Permits and Confirmations Regulating the Operation of Credit Institutions and for the Provision of Information (Licencing Regulations)

Information and documents regarding founders/shareholders

1) Section 28 and 29 of Credit Institution Law

2) Provisions of FCMC Regulations No 92 of 14.07.2020 List of Information Required for Notification of the Acquisition or Increase of a Qualifying Holding and General Principles and Procedure for the Examination of Notification

Information and documents regarding officials

1) Section 24 and 25 of Credit Institution Law

2) Provisions of FCMC Regulations No 201 of 27.10.2020 Procedure for the Submission of Information and Documents for the Assessment of Suitability of Officials of Credit Institutions

In addition to that the entrepreneur shall be acquainted with the following documents in order to fully prepare the information on officials that comply with the legal provisions:

3) Provisions of FCMC Regulations No 94 of 14.07.2020 Regulation on the Assessment of the Suitability of the Executive and Supervisory Board Members and Key Function Holders

4) Provisions of FCMC Regulations No 227 of 01.12.2020 Regulation on Establishment of the Internal Control System

Information on business plan:

The contents of a business plan is described in EU Regulatory Technical Standards.

Base internal procedures and policies to be submitted:

The number and type of these documents depends on the operation of a credit institution in accordance with the envisaged business plan and legal framework (thus the list is illustrative):

• client policy,
• lending policy,
• credit risk management policy,
• assets and liabilities management policy,
• liquidity management policy,
• state risk management policy,
• risk management policy,
• margin risk management policy,
• operational risk management policy,
• capital adequacy and liquidity adequacy policy,
• procedures for identifying and reporting suspicious transactions, as well as procedures for submission of threshold declarations,
• compliance policy,
• remuneration policy,
• accounting policy,
• HR policy.

Other recommendations:

To prepare the documents in good quality Latvijas Banka recommends reviewing also:

• EBA Guidelines on a common assessment methodology for granting authorisation,
• ECB Guidelines on credit institution licencing.

Costs

The review of application is free of charge.

Time limit for examining the application

Latvijas Banka starts examining the application within 3 months but no longer than 12 months from confirmation that the application is complete.

Assessment of application: Latvijas Banka and the ECB carry out the assessment of the application as to the substance.

What does the entrepreneur do?

• Follows the examination process by using the project management tool. The tool does not reflect the activities of the ECB.
• Provides answers to additional information requests by Latvijas Banka and the ECB as soon as possible.
• Corrects the submitted documents according to Latvijas Banka and the ECB instructions.
• Participates in meetings held by Latvijas Banka.

What does Latvijas Banka do?

• Carries out the assessment of the application as to the substance.
• Consults the ECB, agrees on a common stance on the assessment.
• Contacts the contact person of the entrepreneur in case of identification of deficiencies.
• Draws up a letter if deficiencies are identified in the application.
• Continues the examination of the application pursuant to the additions submitted.
• Completes the examination of the application.

What should be taken into account?

• Please follow the course of the examination of the application.
• Please provide additional explanations and make the necessary corrections as soon as possible.
• Representatives of the entrepreneur are invited to participate in meetings of Latvijas Banka, not just consultants (if any).

Costs

No additional costs associated with the examination of documents during the assessment stage of the application are applied.

Receipt of authorisation: Latvijas Banka finalises the examination of the application and takes a decision and submits a draft proposal to the ECB. The ECB adopts a decision on granting an authorisation to carry out the activities of credit institution. The decision is made within the legal deadline. If Latvijas Banka decides on the refusal of authorisation, Latvijas Banka consults the draft with the ECB and takes a refusal decision in case of the ECB agreement to such decision.

What does the entrepreneur do?

• Accumulates initial capital in the amount of EUR 5 million, to open an account in Latvijas Banka and transfers the money.
• Prepares to obtain authorisation and commence operations in accordance with the business plan.
• Designates users of Latvijas Banka Data Reporting System for future communication with Latvijas Banka and submission of performance reports.

What does Latvijas Banka do?

• Prepares a draft proposal on the issue or a decision of refusal to issue authorisation.
• The ECB sends the decision on authorisation to the entrepreneur or Latvijas Banka sends the decision on refusal to grant authorisation to entrepreneur.
• Informs relevant state institutions on authorisation, places the information on the website and databases.

What should be taken into account?

• Please refer to information provided by Latvijas Banka on access to the Data Reporting System.
• Please refer to information related to the requirements and procedures for reporting.
• Prepare to commence activities in accordance with the approved business plan and procedures.

Costs

No additional costs associated with obtaining authorisation during the stage of obtaining authorisation.

Supervision: Latvijas Banka supervises activities of the credit institution in accordance with the requirements of Latvian and European Union legal framework.

What does the credit institution do?

• Provides answers to Latvijas Banka requests.
• Prepares reports in accordance with laws and regulations.
• Notifies Latvijas Banka of changes in documents submitted for authorisation.
• Notifies Latvijas Banka of substantial changes or new services that the credit institution intends to provide.
• Reports on material incidents in the course of the provision of banking services.
• Gets acquainted with credit institution’s curator designated by Latvijas Banka.

What does Latvijas Banka do?

• Designates the credit institution’s curator.
• Assesses compliance of credit institution with the regulatory requirements.
• Requests additional information on the business and performance of the credit institution.
• Examines the reports submitted and supervisory information.
• Cooperates with the ECB in supervisory issues.

What should be taken into account?

• In case of uncertainties, please contact the curator designated by Latvijas Banka.
• Please submit reports and requested supervisory information on a regular basis.
• Notify of changes in the process of the provision of services, as well as changes in documents submitted for authorisation, including in case of changes to the structure officials or participants.

Costs

After the authorisation is granted, the credit institution pays to Latvijas Banka up to 0.033 per cent including from the average amount of assets of the credit institution per quarter.