OREANDA-NEWS. February 05, 2009. To carry out financial sector monitoring strengthening activities ensuring stable performance and development of financial sector, facilitate effective and fast bank restructuring process, as well as to encourage loyalty of investors by speeding up of payments in case deposits are inaccessible, the Cabinet of Ministers (CoM) approved amendments to several banking sector regulations developed by the Ministry of Finance, reported the Official website www.mk.gov.lv.

The Minister of Finance underlines: “Thus circulation of money will be enabled in the economy. The state provides stability in the whole Latvia’s finance sector. One of key risk factors – loyalty crisis among financing providers – diminishes, otherwise it could reflect, for example, as outflow of investments to foreign banks or sharp cut of accessibility to financial resources which could negatively influence Latvia’s national economy.”

Amendments to the Credit Institution Law stipulate setting of new procedure for imposing restrictions on credit institutions which will be implemented by the Financial and Capital Market Commission (FCMC) to avoid excessive outflow of investments or other attracted resources, threats to credit institutions or their insolvency, as well as threats to security or stability of Latvia’s credit institution sector which could cause serious losses to Latvia’s national economy.

Thus, rights of action of the FCMC have been widened both in situations when a credit institution faces financial difficulties and in cases when such problems can be reasonably forecasted. According to amendments the FCMC will be entitled to appoint its authorized person and set amount of tasks to be performed within his/her mandate, including rights to perform bank restructuring. Qualification requirements for the authorized person also have been prescribed.
 
Amendments to the Deposit Guarantee Law specify definition of deposit inaccessibility, prescribe clearer and faster procedure for gathering information about depositors to whom guaranteed compensations have to be paid. Also the procedure for allocation of lacking resources from the state budget has been improved. According to amendments the period for payment of guaranteed compensation will be shortened to 20 working days with rights to prolong it for 10 additional working days.

Also amendments have been introduced in the Law on the Financial and Capital Market Commission stipulating that only the Council of FCMC is entitled to take decision on restriction of rights of financial and capital market member. But amendments to the Civil Procedure Law stipulate that term for revision of credit institutions’ insolvency and liquidation cases shall be shortened from 15 to 5 days.

The Government also approved Regulations of the CoM on procedure for provision of State guarantees to bank loans. The Regulations prescribe procedure by which the Minister of Finance issues guarantees to the bank loans on behalf of the State to decrease overall economic risks, avoid social economic crisis or reduce its impact and ensure accessibility to resources in emergency situations. The Regulations of the CoM define procedure for servicing and supervision of loans.

Amendments to legal acts regulating the banking sector have been developed in consultations with international financial experts and taking into account recommendations of the International Monetary Fund. The Parliament still has to decide on amendments to laws.