The government supported the reform that provides for the transfer of oversight of non-bank creditors from the Consumer Rights Protection Centre to the Bank of Latvia. Despite promises to reduce costs for the industry, market participants fear stricter control and increased bureaucracy.
The government has approved a package of 12 bills that provide for the transfer of oversight of the non-bank lending market from the Consumer Rights Protection Centre (CRPC) to the Bank of Latvia, writes Latvijas Avīze. The reform was supported despite resistance from the fast lending industry, the CRPC itself, and the Ministry of Economics.
The initiators of the changes are the Ministry of Finance and the Bank of Latvia. The main idea of the reform is to concentrate oversight of the entire financial sector in one institution. Currently, the Bank of Latvia already supervises commercial banks, insurance companies, and investment firms, while the fast loan market remains under the supervision of the CRPC.
Proponents of the reform argue that this is a historically established anomaly. The resigned Prime Minister Evika Siliņa stated at a government meeting that the decision to transfer control to the CRPC back in 2016 was initially temporary and unsuccessful. According to her, it is strange for an institution that oversees the safety of toys and goods to also be responsible for one area of the financial market.
The reform is also linked to recommendations from the Council of Europe’s Moneyval committee, which calls for more unified and consistent oversight of the financial system and the fight against money laundering.
The authors of the bills claim that the changes will also benefit the creditors themselves. It is planned to reduce oversight fees, and for some companies, even by five to six times. In addition, it is proposed to abolish the licensing fee of 250,000 euros. According to the authorities' plan, this could lower the cost of services for borrowers as well.
However, industry representatives are skeptical. Non-bank creditors state that they do not see real benefits for either businesses or clients.
As noted by Latvijas Avīze, public criticism of the reform may hide fears of a stricter and more formalized working style of the Bank of Latvia. Businesses are concerned that new requirements will lead to additional costs for compliance, internal control, and reporting.
In fact, this is an attempt to finally integrate the fast loan market into the overall financial system of Latvia — according to the same standards that apply to banks and other financial institutions.
