We can look back on 2025 with a strong sense of accomplishment. It is becoming increasingly clear that the integration of the Financial and Capital Market Commission into Latvijas Banka was a strategically sound decision. Significant improvements have been achieved both in lending and in the accessibility of financial services, and similar consolidation of other financial sector institutions would also yield tangible benefits elsewhere in the sector. As the legend goes, Riga is never truly finished, and we too will continue persistently improving the financial sector, modernising it and strengthening its resilience.
Despite the shock caused by trade tariffs and the high level of uncertainty in the global economy, inflation in the euro area returned to the target of 2% in 2025, with the Governing Council of the ECB fulfilling its mandate to maintain price stability. Economic growth gradually became stronger and more broad-based. Nevertheless, Russia's ongoing war of aggression against Ukraine, coupled with continuing geopolitical shocks, is creating new challenges in 2026 that could undermine the fragile green shoots of growth. The war in the Middle East has triggered an energy shock that will drive up prices and slow economic growth worldwide. The Governing Council of the ECB will continue to monitor developments closely and, if necessary, will not hesitate to adjust monetary policy to ensure that inflation returns to 2% over the medium term. The task of a central bank is to ensure price stability and the resilience of the financial sector, while the main responsibility for supporting economic growth lies with governments. The structural changes are clearly outlined in Mario Draghi's report "The future of European competitiveness". The most urgent priorities are to strengthen Europe's military defence capabilities and create a single market for financial services.
Latvian society values the work carried out by Latvijas Banka highly. The central bank ranks among the institutions trusted most by the public, which is both an honour and a responsibility. According to data from a population survey conducted by the market and social research agency Latvijas Fakti at the end of 2025, more than half of the Latvian population trusts Latvijas Banka, and more than two thirds view that Latvijas Banka conducts its operations professionally. One of Latvijas Banka's responsibilities is to advise the Saeima and the government on matters of economic policy, with cooperation in this area improving during 2025, particularly with the Budget and Finance (Taxation) Committee of the Saeima. This is especially important as thoughtful, prudent, and forward-looking decisions that take into account the views of independent and professional experts are vital during a turbulent pre-election period marked by populism.
In 2025, Latvijas Banka's priorities and key areas of activity were a secure and crisis-resilient financial sector, modern and accessible financial services, and an innovative and efficient central bank.
In the area of critical financial services, Latvijas Banka introduced a solution for offline card payments that will enable the use of payment cards in large grocery stores, petrol stations, and pharmacies during communication disruptions. We also enhanced continuity solutions for critical financial services, including the network of critical ATMs and settlement arrangements for large companies in crisis situations. At the beginning of the year, minimum requirements for cash availability entered into force, and efforts to strengthen the digital resilience of the financial sector and mitigate cyber risks continued. We introduced Verification of Payees (VoP), which will reduce the risk of errors and fraud in interbank payments.
In the area of financial services accessibility, a breakthrough in lending became firmly established last year. Lending drives economic growth. Corporate lending growth has been particularly robust, increasing by more than 16%. Household lending was supported by lower interest rates and a simplified framework for mortgage refinancing. More than 11 500 mortgage borrowers used the possibility to renegotiate, and their savings during the lifespan of the loan amounted to approximately EUR 50 million. As bank markups decrease, borrowers can potentially afford larger housing for the same monthly payment – approximately 6 square metres more in a new development project and around 18 square metres more in Soviet time apartment blocks.
In 2025, we continued our efforts to improve the functioning of the 2nd pension pillar. Proposals to allow residents to choose the most appropriate time to withdraw funds when the value of securities decreases in financial markets were prepared and submitted to the Ministry of Welfare, which is responsible for this area. In addition, investment limits were reviewed, the management of the 2nd and 3rd pension pillars was simplified, and a redevelopment of the manapensija.lv website was launched, including a gradual transfer from the securities depositary Nasdaq CSD SE. Decisions made in 2025, such as the reduction of ongoing commission caps for the 2nd pillar managers, resulted in EUR 2.8 million in savings for the 2nd pension pillar participants.
Other important measures include the opening of Latvijas Banka's payment system to direct participation by payment institutions and electronic money institutions, the development of sectoral fintech and capital market strategies, the drafting of legal acts allowing credit unions to start lending to legal entities, as well as the introduction of a new type of financial institution – specialised credit institutions with a lower initial capital. The European Union supervisory framework was transposed, with requirements eased for the smaller systemically important financial institutions to ensure proportionality of regulation.
Preparatory work was carried out during 2025, and as of 1 January 2026, new requirements for the in-person provision of commercial banking services entered into force. It will significantly improve access to commercial banking services for residents and businesses in the regions.
Latvijas Banka closed 2025 with a total recognised profit of EUR 332 million. Latvijas Banka's payments into the state budget for 2025 amounted to EUR 56 million: EUR 19 million as dividends from 2025 profits, EUR 21 million as interest on deposits of the Latvian government, and EUR 16 million as taxes.
In 2026, we will continue to modernise and strengthen the financial sector, with financial services accessibility and meeting customer needs among our priorities. In this context, my aspiration for the financial sector in 2026 is greater ambition and dynamism.
My sincere thanks to my colleagues at Latvijas Banka for all that was achieved last year. I expect the same dedication and energy from myself and from every colleague throughout this year. We will succeed!
Mārtiņš Kazāks
Governor of Latvijas Banka
8 May 2026