The Annual Report serves as an opportunity to look at the bigger picture behind the countless daily tasks, highlight the results achieved, and outline the key directions for our work in the years to come. The focused, forward-looking, and sustained efforts of recent years to reform and strengthen Latvijas Banka have established a strong foundation for the continued development of both Latvijas Banka and the broader Latvian financial system. Our activities have led to exceptional results, with a great deal of accomplishments in 2024.
I would like to highlight just a few of these areas.
The availability of cash is strong, the network of ATMs is secure, a new network of critical ATMs has been established with higher resilience in crisis situations. We are among the leaders in modern payments, not only in our region, but also across the entire euro area. Our established and well-maintained instant payment infrastructure is convenient, secure, and popular. Interbank payments are cheap and increasingly used by the population and businesses alike. Last year, we passed significant milestones towards ensuring that, from 2025 onward, people will be able to use their payment cards to buy food, medication, and fuel even during internet outages. This means that both cash and non-cash payment methods will remain available for transactions even in times of crisis.
During our time on the Governing Council of the ECB, we swiftly tamed the exceedingly high inflation caused by Russia's unjustified invasion of Ukraine. This enabled a cumulative reduction of 100 basis points across key interest rates over the past year, helping ease financing costs for borrowers. In turn, lower inflation underpins greater purchasing power for the population, supporting economic growth.
Since 2023, following the integration of the Financial and Capital Market Commission, Latvijas Banka's responsibilities have expanded to encompass the regulation and oversight of the financial sector. In two years, we have moved beyond the lowest point both in terms of lending and the approach of commercial banks towards their customers. The side effects of the capital repairs have largely been resolved: regulation has been simplified, manuals revised, account accessibility is no longer a systemic issue, and the number of customer complaints is shrinking. We will persist in our efforts to ensure that honest customers are treated with respect, without facing disproportionate burdens from regulatory requirements.
Lending is currently expanding at a significantly faster rate than the economy. Loans are becoming more affordable – just a few years ago, the average markup on new mortgages from commercial banks was 2.5%, whereas it is now around 1.5% and continues to decline. At the request of Latvijas Banka, the process of re-crediting private mortgages was streamlined, with a similar solution for corporate lending also initiated last year. The regulation, developed by Latvijas Banka and approved by the Saeima, will require commercial banks to expand their presence in regions, bringing commercial banks closer to their customers, resulting in enhanced access to financial services.
We have developed and submitted proposals (currently under examination by the Saeima) aimed at boosting the returns on the 2nd pillar pension scheme to deliver a more than 60 million euro benefit to individuals. In record time, we introduced regulatory changes at the euro area level, enabling FinTech companies to connect to Latvijas Banka's payment systems starting in 2025 – paving the way for the development of a powerful and internationally significant FinTech sector in Latvia.
These efforts deliver tangible and practical benefits to each individual and business in Latvia. I am pleased that the public values our efforts. Surveys suggest that two-thirds of Latvia's population trust Latvijas Banka. At the end of 2019, when I assumed the role of Governor of Latvijas Banka, the institution's reputation had been tarnished. We have completely turned this around – today, Latvijas Banka stands as one of the leading institutions in Latvia: powerful, dynamic, and modern. Our work is also recognised internationally – Latvijas Banka's views and analyses are regularly featured on financial news channels and in agency publications across Europe.
However, numerous challenges persist, and considerable work still lies ahead. A multitude of risks remains, and global uncertainty is at an elevated level – driven in particular by sharp geopolitical shifts, tariff wars, and rapid technological advancements. We will persist in our dedicated efforts to serve Latvia's best interests, and in the years to come, we will focus our efforts on three directions.
The first direction is a secure and crisis-resilient financial sector and payment systems.
The second direction is the accessibility of financial services – more affordable, modern, and tailored financial products for various customer groups, supported by extensive regional coverage, and a diverse financial sector ecosystem, underpinned by a well-developed non-bank sector.
The third direction is an innovative, efficient, and technologically advanced central bank. It entails data management aligned with the highest global standards, coupled with the use of artificial intelligence tools.
I would like to express my GRATITUDE to each member of Latvijas Banka's team for their contributions, and I wish them energy and strength in 2025. We are a powerful, strong, smart, and purpose-driven team. Together, we can achieve remarkable success!
Mārtiņš Kazāks
Governor of Latvijas Banka
12 May 2025