Financial Sector Transformation
Latvian Parliament progresses with amendments to strengthen financial sector regulation
Latvian Parliament (Saeima) is ready to adopt a legislative package to strengthen financial sector regulation next week, including amendments to the laws governing anti-money laundering and counter terrorism financing, the Financial and Capital Market Commission, and the regulation of credit institutions. The bills are the centerpiece of the financial sector regulation overhaul announced by Prime Minister Krišjānis Kariņš.
On 30 May, Saeima passed the first reading of urgent legislative changes to sanctions law. These changes would expedite the implementation of Moneyval’s recommendations, helping to strengthen the Latvian financial sector. The amendments will allow for the application of UN-imposed financial and civil sanctions within 48 hours of their adoption. The amendments will also allow the Cabinet of Ministers to establish a Sanctions Coordination Council to ensure swift and unified enforcement of sanctions. The amendments should be adopted in June.
US Treasury expresses strong support for Prime Minister’s financial sector regulation overhaul
On 16 May, Prime Minister Mr. Krišjānis Kariņš met with Mr. Marshall Billingslea, the Assistant Secretary for Terrorist Financing in the US Department of the Treasury. During the meeting, Mr. Kariņš and Mr. Billingslea discussed Latvia's progress and the envisaged measures in the field of the prevention of money laundering and terrorism financing, including the introduction of the Moneyval’s recommendations.
Prime Minister stressed that the Latvian government has committed itself to creating a stable and sustainable financial sector and will continue its work on improving the financial sector. Mr. Billingslea acknowledged that the prime minister's information on efforts to align the Latvian financial sector is a positive signal, and the US is ready to give Latvia support in carrying out these reforms.
Moody’s affirms Latvia’s credit rating
On 31 May, the credit rating agency Moody’s Investors Service reaffirmed its ‘A3’ long-term foreign currency sovereign credit rating on the Republic of Latvia with a stable outlook.
Moody’s cited Latvia’s continued strong growth performance and the Latvian government’s low and declining levels of debt as key reasons for keeping the stable rating.
Moody`s Investors Service expects that Latvia’s fiscal strength will be maintained and that the Latvian government will continue to reduce banking sector risks related to money laundering and the financing of terrorism.
DBRS changes trends on Latvia’s ratings to Positive
On 24 May, DBRS Ratings Limited confirmed Latvia’s Long-Term Foreign and Local Currency – Issuer Ratings at A (low). At the same time, DBRS confirmed the Republic of Latvia’s Short-Term Foreign and Local Currency – Issuer Ratings at R-1 (low). The trends on all ratings have been changed to Positive.
The Positive trend reflects DBRS’s view that Latvia’s credit fundamentals appear to be improving. The liquidation of ABLV Bank AS last year and the significant decrease in non-resident deposits (NRDs) in the financial system have not affected financial stability, or Latvia’s economic or fiscal performance. Furthermore, comprehensive tax reform has addressed some of Latvia’s structural challenges by making personal income taxation more progressive and improving corporate sector competitiveness.
Minister of Justice encourages the establishment of an economic affairs court in Latvia
Minister of Justice Jānis Bordāns has encouraged to establish the Economic Affairs Court in Latvia that would ensure effective case handling, qualitative judgements and fair penalties. The Secretary-General of OECD, the Foreign Investors Council in Latvia, and many entrepreneurs have voiced support for this idea.
The Government currently plans to develop and adopt new regulations for the establishment of the Economic Affairs Courts by the end of 2019, and to select and train judges and employees by December 2020. The Economic Affairs Court could start work on 2021.