In 2021, as it continued active participation in the Nordic-Baltic Macroprudential Forum, Latvijas Banka regularly shared experience on the latest developments in financial stability with other central banks in the region, including on Covid-19 and macroprudential measures to mitigate the financial stability risks. By participating in the Financial Stability Committee (consisting of representatives of the ECB, national central banks and supervisory bodies) and its working groups, Latvijas Banka contributed to the assessment of financial stability of systemic risks, development of financial stability analysis tools and assessment of macroprudential policy tools.
In parallel to the above Nordic-Baltic and euro area working groups, Latvijas Banka was also an active member of the Advisory Technical Committee of the ESRB and its working groups dealing with the development of policies, analyses and opinions at EU level. In cooperation with the ESRB and AS Attīstības finanšu institūcija Altum, it continued compiling information on support measures for companies hard-hit by the pandemic that made it possible to analyse the impact of support measures on financial stability and other areas, prepare comparisons with other countries and advise the Latvian government on improving the national support measures.
In 2021, two meetings of the Macroprudential Council took place. During these meetings, Latvijas Banka, the FCMC and the Ministry of Finance discussed systemic risks to financial stability and the need for macroprudential measures to mitigate them. Development of lending (including the slow lending to non-financial corporations) and the licensing of investment platforms, as well as any risks related to them were the focus of these meetings.
In 2021, in cooperation with the FCMC and the Consumer Rights Protection Centre Latvijas Banka introduced the recommendations of the ESRB on the use of the Legal Entity Identifier (LEI). They aim at ensuring that all legal entities established in the EU which carry out financial transactions receive, maintain and always use the LEI. Unique, exclusive and universal use of the LEI improves the ability of various institutions to assess systemic and developmental risks and implement corrective measures to limit systemic risks to financial stability in the EU.
Commercial real estate market was significantly affected by epidemiological restrictions of the Covid-19. To improve the analytical framework and to close data gaps foreseen by the ESRB recommendationARecommendation of the European Systemic Risk Board 21 March 2019 amending Recommendation ESRB/2016/14 on closing real estate data gaps (ESRB/2019/3).
, Latvijas Banka procured a commercial real estate data and market survey. Thus, Latvijas Banka will gain access to data time series and regular updates on various commercial real estate market developments (including average prices, average rental prices, average rental profitability, total floor space available on the market, unrented space, space under construction and other indicators).
Latvijas Banka continued to closely cooperate with the public institutions of the Republic of Latvia on AML/CFT and sanctions: to improve the legal framework, develop and maintain the Latvian position on EU AML/CFT action, prepare the public summary of the national AML/CFT risk assessment report and participate in developing the assessment scope of the Baltic and Nordic regional AML activities.
At the initiative of Latvijas Banka, the Ministry of Welfare supplemented the Cabinet of Ministers Regulation No. 765AProcedures by which the Manager of Funds of the State Funded Pension Scheme shall Calculate the Payment for the Management of an Investment Plan and Procedures for the Accounting and Deduction of the Abovementioned Payment.
on the management of the 2nd pillar pension funds to determine the procedure for calculating the variable share of the performance fees of new investment plans that can invest 100% of their funds in shares and other securities with similar risks.
Latvijas Banka and other financial sector participants (Finance Latvia Association, FCMC, AS Nasdaq Riga, Latvian Leasing Association and Latvian Association of Insurers) agreed on cooperation to raise public awareness on sustainability and sustainable financial concepts and principles, and to facilitate their use in businesses and in everyday life. In May 2021, the Memorandum of Cooperation to Promote Sustainability was signed, and several priorities were included in the Action Plan to achieve the objectives of the Memorandum.
To continue research on assessing the impact of climate risks on the financial sector, in 2021 the Financial Stability Report of Latvijas Banka included the results of analysisAhttps://www.makroekonomika.lv/cik-paklauts-klimata-riskiem-ir-latvijas-vertspapiru-portfelis
on the exposure of the securities portfolio of Latvia's financial sector to climate risks. This study and sustainability issues were extensively discussed with financial policy makers.
In 2021, Latvijas Banka analysed loans for house purchase in Latvia's regions by relying on evidence from Latvijas Banka's Credit Register on the real estate collateral location. The results of analytical material allow for assessing in greater detail regional lending differences and help in planning policy measuresAMortgages. What is going on in the Latvian regions? Mortgages. What is going on in the Latvian regions? (makroekonomika.lv).
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As crypto-assets become ever more popular in the world, Latvijas Banka conducted the first assessment of crypto-asset use in LatviaAhttps://www.makroekonomika.lv/kriptoaktivu-izplatiba-latvija-novertesanas-pirmie-soli
, and informed the financial stability experts of the Nordic and Baltic central banks about its results.
In 2021, Latvijas Banka continued analysing vulnerabilities of the real estate market by developing the range of data available in the Credit Register and various solutions for assessment of borrower vulnerabilities and the respective risks to the financial sector by relying on the Credit Register and other national registers (e.g. data from the State Land Service and the State Revenue Service).