Dealing with Lenders: A New Task for the Bank of Latvia

Although the introduction to this document states that it "will not create additional administrative burdens for the non-bank lending sector," the very fact that the Ministry of Finance is turning to alternative sources of money for the population indicates that the budget urgently needs additional revenues.

"Big Three" Against the Background of Smaller Players

Currently, Latvia has three largest credit institutions, which are supervised by the European Central Bank: Swedbank AS, AS SEB banka, and AS Citadele banka. The Bank of Latvia, for its part, regulates and supervises 233 market participants belonging to the following categories: managers of alternative investment funds; insurance companies; insurance intermediaries; financial management companies; investment brokerage firms; investment management companies; collective financing service providers; payment institutions; electronic money institutions; credit unions; crypto-asset service providers, and others.

The services provided by the Bank of Latvia primarily include the prevention of money laundering and terrorism financing (NILLTPFN) and the management of sanction risks.

At the same time, as noted by the Ministry of Finance, there is a "consolidation of the market" – over the past 8 years, 29 licensed enterprises have left the consumer lending sector in Latvia, while 8 have started operations. As of the beginning of 2026, there were 39 licensed legal entities providing consumer loans in the country (compared to 62 in 2018). Their records are maintained by the Consumer Rights Protection Center.

Another 25 enterprises are "credit intermediaries and representatives of credit intermediaries offering intermediary services for obtaining such loans, the repayment of which is secured by a mortgage on real property or whose purpose is to acquire or retain rights to real property." Meanwhile, the State Revenue Service has recorded 308 non-bank enterprises through its channels that have not undergone licensing, among which 77 have lending as their primary activity. 20 enterprises reported zero turnover.

These Can Be Overlooked

Such a variety of lending forms is compounded by the duplication of administrative functions. "Several institutions are also involved in considering consumer complaints, as it is not always clear to the consumer how competencies are distributed among institutions regarding the regulation of the main account and the terms of the loan agreement, refinancing of mortgage loans, or the availability of financial services in the regions, which often leads to fragmentation of information and differences in interpretation among institutions." In the vision of the agency led by A. Asheradens ("New Unity"), the following lenders may be excluded from the NILLTPFN supervision:

"a) financial activity is limited in absolute terms (not exceeding 1000 euros per transaction or for each client);

b) financial activity is limited based on the transaction;

c) financial activity is not the primary activity of such persons and the turnover of financial activity does not exceed 5% of the total turnover of the respective individual or legal entity;

d) financial activity is ancillary and directly related to the primary activity of such persons;

e) financial activity is provided only to clients of the primary activity of such persons and is generally not offered to the public."

After All, This is the Financial Sector

"Analyzing the practices of other countries, it can be concluded that in several countries, the protection of consumer rights and interests in the financial sector is most often carried out by the regulatory authority of the financial sector," the Ministry of Finance document states, "Its competence includes the protection of consumer rights and interests, including establishing standards of conduct in providing services (obligation to inform, transparent contract terms, disclosure of risks), considering consumer complaints, conducting inspections, and applying sanctions for violations in the field of protecting consumer interests and rights."

The Organization for Economic Cooperation and Development also holds the same position, which official Riga has recently been looking to for decision-making, no less than to the European Union. By the way, a similar practice to Latvia, where the issuance of money is regulated by a consumer protection body, exists only in Bulgaria and Cyprus. If creditors of all kinds fall under the wing of the Bank of Latvia, it will be possible to carry out:

"– Supervision of the transparency of interest rates, fees, and total costs of loans, ensuring that the information provided to clients is understandable, comparable, and allows for informed decisions;

– When assessing the fairness of contracts, eliminating unfair contract terms and strengthening the balance of contractual relations between service providers and consumers;

– Compliance with the principles of responsible lending, which is especially important to reduce excessive debt obligations and, in the long term, promote the financial well-being of society; – Introduction of unified and effective requirements for the legalization of proceeds from criminal activities and customer due diligence (AML/KYC), ensuring both compliance with international norms and equal treatment of service providers towards clients;

– Supervision of the accessibility of financial services, including in a regional context."

... Of course, the mere change of supervisory functions and their concentration in the institution of Martins Kazaks will not increase the wealth of Latvians. As long as people are driven by advertising and strive for unattainable consumption standards based on their income, there will continue to be multi-billion debts among the population for cars, smartphones, and travel. As for the Bank of Latvia, in the absence of an emission component, it indeed has little to do. So let it keep an eye on order.