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Financial and Capital Market Commission

Goals
- Stability
- Development
- Protection of interests of investors, depositors and the insured
- Commission's activities in pursuit of its goals
Structure

Goals

The strategic goals of the Financial and Capital Market Commission:

1. Stability

The main strategic goal of the Financial and Capital Market Commission (hereinafter, the Commission) is to ensure overall stability in the financial and capital market. That means that, within powers granted by law, the Commission will turn against any participant of the financial and capital market whose action or inaction may cause instability in the financial and capital market as a whole or its separate sectors.

To ensure the stability, the Commission has set the following objectives:

1.1. Promotion of overall trust in the Latvian financial system. Currently the level of trust of the Latvian population in the financial and capital market is lower than the level achieved in the European Union (hereinafter, the EU). The Commission will focus its efforts on increasing the trust in the participants of the financial and capital market to the extent that the trust reaches or exceeds the level of trust observed in EU member countries.

1.2. Surveillance of risks of the Latvian financial system. As the main goal of the Commission is to promote the stability in the financial and capital market, the Commission will devote a greater attention to the surveillance of risks faced by the market participants.

1.3. Minimisation of potential losses. One of the tasks of the Commission is to follow whether the market participants are able to meet their liabilities. The solvency of the market participants depends on economic and other factors. The council, the board, and the largest shareholders of each market participant are responsible for the financial stability and activities of their firm in the market. Full responsibility is also born by the customers who are competent in financial issues, for instance, large enterprises and institutional investors. In order to minimise the risk of insolvency of market participants, the Commission will monitor the compliance with the requirements of minimum capital and capital adequacy, follow the activities of market participants, and will develop appropriate methodology for assessing the financial standing of market participants. The activities of the Commission are aimed to minimize the impact of potential insolvency of certain market participants on customers' trust in the financial system of the country in general.

1.4. To reduce the possibilities to use the Latvian financial system for laundering of proceeds derived from criminal activities. The Commission will focus its efforts on maintaining and boosting the reputation of the Latvian financial system. The Commission will improve and develop in accordance with the requirements of the European Union directives and good practice the procedures for supervision and monitoring the participants of the financial and capital market. The Commission will control the internal control procedures of the participants of the financial and capital market in order to prevent the possibility to use the Latvian financial system for laundering of proceeds derived from criminal activities.

1.5. Safety of information technologies. In view of the increasing importance of information technologies in financial services sector, the Commission will monitor the compliance with IT safety regulations by the market participants. The Commission will amend these regulations depending on the degree of risk caused by information technologies used by the market participants. While carrying out the analysis of market participants, the staff of the Commission will regularly check whether the regulations are complied with.

1.6. Cost effectiveness of the Commission's activities. Recognising the necessity to ensure qualitative supervision of the financial and capital market, the Commission will take into account the interest of the participants of the financial and capital market in effective allocation of financial resources. Simultaneously the Commission will preclude expenses not related to its tasks.

2. Development

In order to promote the development, the Commission has set for itself the following objectives:

2.1. Promotion of free competition in the financial and capital market. Fair and open competition of the market participants gives consumers a choice as to the market products and their prices. The Commission will use all legal and regulatory means and resources to adopt punitive measures to penalize those market participants who engage in unfair competition by means unjustified from economic or business ethics point of view. The Commission will not attempt to reduce the number of market participants by using artificial methods that are non-compliant with the economic principles. However, market stability also means that market participants must be competitive both in Latvia and on the international arena.

2.2. Promotion of innovations. The Commission will not restrict the licensing of new market participants without reason or motivation. New market participants must be financially strong, professional and must simultaneously have a good repute and comply with the requirements of all laws, EU directives and good international practice. The Commission will not restrict the expansion of the existing market participants. Within the scope of its competency the Commission will promote the introduction of new financial products and technologies to boost the competitiveness of market participants.

2.3. Analyses and development of taxation system. The Commission will play an active role in the analysis and development of system of taxes and duties applicable to the participants of the financial and capital market. The aim is to create a system of taxes and duties that is favourable for the development of financial and, especially, capital market. The Commission will consistently adjust all regulations to the requirements of the EU directives and recommendations of international financial and capital market supervisory institutions.

2.4. Implementation of the international accounting standards. The EU is moving towards mandatory application of the International Accounting Standards (IAS) to the financial statements of participants of the financial and capital market and undertakings whose shares are quoted on the stock exchange. As currently the largest participants of the financial and capital market of Latvia - credit institutions - already apply the IAS in preparation of their financial statements, the Commission will impose a mandatory requirement on all market participants to prepare their financial statements in accordance with the IAS.

2.5. Co-operation with professional associations of market participants. The Commission will constructively co-operate with professional associations of market participants in promoting initiatives important for the development of financial market and in resolving of problematic issues. The co-operation will also include the dialogue in the framework Consultative Council of the Financial and Capital Market Commission.

3. Protection of interests of investors, depositors and the insured

In order to protect the interests of investors, depositors and the insured, the Commission has set for itself the following objectives

3.1. Budget transparency. The annual budget of the Commission will be publicly available both on the Commission's web page and at the premises of the Commission. Upon preparation of the budget, the Commission will listen to the opinion of social and professional organisations of market participants, as well as the opinions of the investors and the insured persons. Information about the volume of assets of funds established for the protection of the depositors, investors and the insured will be regularly available.

3.2. Availability of Commission's regulations and orders. The regulations and orders, as well as the statistics of the financial and capital market and the strategy of the Commission will be published on Internet and available at the premises of the Commission.

3.3. Availability of information about market participants to general public. The Commission will stimulate the participants of the financial and capital market to publish without delay information on their financial standing, operational results and risks related to their activities, thus facilitating market transparency, trust of the customers and market discipline

3.4. Raising public awareness about financial services and products. The Commission will regularly follow that customers of the participants of the financial and capital market, especially those whose level of professional education on financial issues is insufficient, have information available about the financial services and products as well as the associated risks. The availability of information would enable customers to make informed decisions in selection of financial services and products.

3.5. Protection of interests of the customers of the financial and capital market. The Commission will follow whether the participants of the financial and capital market provide to the customers of the financial and capital market highly qualitative level of service corresponding to the norms of business ethics

4. Commission's activities in pursuit of its goals

In order to pursue its goals, the Commission

4.1. Issues regulations and orders governing the activity of the market participants.

4.2. Licenses participants of the financial and capital market as well as certain products, for instance, grants permits for the enlargement of share capital and for change of composition of shareholders etc.

4.3. Controls compliance with its regulations and orders.

4.4. Collects, analyses and publishes information about the financial and capital market (quarterly report to the Bank of Latvia and the Ministry of Finance, annual report to the parliament, monthly statistics).

4.5. Prepares recommendations for the improvement of regulations and their harmonisation with the norms of EU legislation.

4.6. Carries out the assessment of risk on the level of an individual market participant, individual market sector as well as of the system as a whole.

4.7. Ensures the accumulation and management of guarantee funds for the protection of the investors, depositors and the insured. Makes respective compensation payments from these funds.

4.8. Co-operates with foreign financial and capital market supervisory organisations, international financial institutions (IMF, EBRD etc.), the Bank of Latvia, the Ministry of Finance of the Republic of Latvia. Provides methodological assistance to the Office for the Prevention of Laundering of Proceeds Derived from Criminal Activity.

Uldis Cerps
Chairman of the Financial and Capital Market Commission
Republic of Latvia

Structure

Source: Financial and Capital Market Commissions website
Related links: Financial and Capital Market Commissions