Saeima Advances Central Bank and Financial Regulator Merger / Article / Eng.lsm.lv
On April 22, the Saeima conceptually supported the merger of the Finance and Capital Market Commission (FKTK) and the Central Bank of Latvia (Latvijas Banka).
At first reading, Parliament approved a new law Project of the Bank of Latvia, which provides a framework for the functioning of the central bank following its merger with the FKTK, as well as the majority of accompanying accompanying packages, which include 24 projects.
As previously reported by LSM, the idea of the merger was discussed in early 2020 and formally put forward by Cabinet in May 2020.
As a result of the merger, macroprudential policies will become more effective and the decisions of the merged institution will also become more effective. The merger will also reduce personnel, financial and material costs in the medium term. The total annual operating expenses of the merged institution are estimated at around 1.6 million euros, or 3.4 percent less than the expenses of the two separate institutions. The merger will also contribute to a more coordinated and efficient development of the financial sector.
The most significant risks associated with the merger include a greater concentration of influence in the financial system, as well as a potential conflict of interest between monetary policy and macro and microprudential supervision.
After the merger of the FKTK with the Bank of Latvia, the Ministry of Finance will continue to develop financial and capital market policy.
The current Bank of Latvia Law has been in force since 1992 and the new Bank of Latvia Law is expected to enter into force on January 1, 2023.
The bill will still be considered in the second and third readings.
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