Change management carried out by the FCMC is a basis for a positive assessment by Moneyval

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The Financial and Capital Market Commission (FCMC) wishes to specify incorrect information spoken by officials in the public space, which suggests that the situation in the Latvian financial sector after the change management that has been carried out by the FCMC since 2016, as well as the supervisory approach implemented for monitoring financial service providers in Latvia so far and its legal framework as if were an obstacle to a good assessment of the State in the Moneyval evaluation process.

The FCMC points out that such statements are untrue and the information flow that is misleading to the public is being generated knowingly in relation to the evaluation of the Latvian financial crime prevention system in the Moneyval evaluation process. Namely, out of 40 FATF Recommendations, the implementation of which in Latvia has been subject to the assessment by the Moneyval for 2018, including completeness and effectiveness, only 13 relate to the financial sector. In last year’s report, the FCMC was among the institutions with the highest assessment, particularly in the field of risk management and international cooperation, therefore the argument regarding the implementation of Moneyval recommendations relating to the amendments to the FCMC law and the request to change the FCMC management do not reflect reality ­ – none of Moneyval recommendations require to address the FCMC approach to the change management process in the financial sector.

The FCMC Chairman Pēters Putniņš:“As an industry supervisor and a member of the Single Supervisory Mechanism of the European Central Bank, we are obliged to react at this point providing our own clarification, so as not to expose the FCMC and ECB to undue reputational risk. We see that the so-called “overhaul” of the financial sector or changing the FCMC management model is actually a preparation for the change of current FCMC management without any reasoned justification and professional evaluation of institution’s performance. The fact that this process is taking place due to external political pressure is no longer being concealed, it became known to the public at the previous meeting of the Saeima Budget Commission. It is therefore a matter of the political influence on an independent authority and forced replacement of the management appointed by the Parliament of the Republic of Latvia, whose mandate is effective until 2022. This is an unprecedented case of political interference in the FCMC’s operations. Moreover, it is not clear in the name of what targets? By weakening the strongest authority in the financial crime prevention and monitoring chain and in supervision of the financial sector, the entire Moneyval process may have been impaired. Also, the proposed expanding of the FCMC’s functions is not necessary in the monitoring of financial crime prevention, as we are already carrying out one. We do not understand the purpose of changing the FCMC management and reforming exactly the strongest link in the chain of supervision.”

Change management 2016-2019:

Against the false informational background, which is being created about the supervision of the Latvian financial sector, the FCMC provides explanatory information on the management of changes made in the financial sector over recent years, started in 2016, when Latvia became a member of the OECD. Supervision of the Latvian banking sector has undergone an unprecedented self-cleaning process (particularly banks servicing so-called foreign customers) over last three years, by reviewing the former business approach and forcing out high-risk foreign client segment (~ EUR 10 billion). For the first time in the past 20 years, domestic and European Union member states’ deposits have peaked 91%. Last summer, Latvian banks ceased their business with shell banks banned in Latvia, and in this period, compared to 2014, foreign customer payments in the US dollars decreased more than 26 times. In this way, by significantly reducing high-risk fast transaction business the Latvian financial system and the country as a whole are exempt from undue reputational risk, and in terms of banking clients there has been a return to Latvia’s natural geopolitical environment. Over the last four years since changes, fines amounting to 16 million euro have been applied to the Latvian banks and payment institutions (compared to the total fines of 1 million euro in the previous 11 years). Also following the reform process, Latvia’s banking capital adequacy ratios are high, mostly well above the standard, while liquidity ratio threefold above pursuant to the EU requirements. This year, the FCMC completed the assessment of new business models of Latvian banks, taking into account future business strategies and future risks impact, and approved the level of individual key performance indicators for each bank.

FCMC Chairman Pēters Putniņš: “The most ambitious reform has taken place in Latvia’s financial sector, real change management, which was launched in 2016 upon becoming a member of the OECD. For the current FCMC Board, it has been the most important contest, in a way, to strengthen financial crime prevention mechanism, while in a short time abandoning high-risk customers and ensuring the stability of the sector. This is Latvia’s performance, evaluated by the experts. We do not consider Moneyval evaluation as a political process, because we are certain it is the expert forum providing a professional assessment of financial crime prevention system. We would highly appreciate if the state officials declaring that Latvia would be included in the grey list due to the FCMC, tell us exactly – what had the FCMC failed to do? It is also important to openly say what should be done otherwise by the new Board of the FCMC and which decisions and tasks of the current FCMC Board to the market participants should be altered or revoked. It would be a professional discussion appropriate to a developed democratic state.”

The FCMC emphasises that fundamental reforms in the financial sector should be well-prepared and strategically targeted in order to avoid unnecessary reputational damage to the process of change management in the sector ongoing since 2016 and restoring the international reputation.

Further information:

In 2016, the FCMC Chairman P. Putniņš received distinction of the Cabinet of the Republic of Latvia for a significant contribution to sectoral reforms resulting in Latvia’s accession to the OECD
INFOGRAPHICS: Transformation of the Latvian banking sector 03.05.2019

For further information:
Ieva Upleja
Head of FCMC Communications Division
Phone: + 371 67774807; e-mail:


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