The Financial and Capital Market Commission (FCMC) is the single financial sector supervisor in Latvia, responsible for the regulation and supervision of the country’s financial and capital markets and their participants.

The FCMC regulates banking, insurance, securities markets, pension funds, finance companies, credit unions, payment service providers and other participants in the financial sector. Its key objectives are to foster the stability, transparency, efficiency and competitiveness of Latvia’s financial system.

In this comprehensive 10,000+ word guide, we will explore the history, structure, responsibilities and operations of the FCMC. The main topics covered include:

History and Establishment of the FCMC

The FCMC was established in 2001 by merging the Bank of Latvia’s Banking Supervision Department and the Latvian Securities Commission. This created an integrated financial supervisor in line with best international practices.

The FCMC is an autonomous public entity that operates independently from the government and is funded by fees paid by market participants. This ensures its objectivity in regulating and supervising the financial sector.

Organizational Structure of the FCMC

The FCMC consists of two main decision-making bodies:

The Council

The Council is the FCMC’s principal decision-making body. It has six members – a Chairman, Deputy Chairman and four Council Members.

The Chairman of the Council is nominated by the Cabinet of Ministers and appointed by the Parliament. The Deputy Chairman is appointed by the Cabinet of Ministers upon nomination by the Governor of the Bank of Latvia.

The Council Members are also nominated by the Cabinet of Ministers and appointed by the Parliament. They serve for five year terms and represent different areas of expertise like banking, insurance, securities markets, macroeconomics and law.

The Board

The Board is the executive body that carries out the FCMC’s day-to-day operations. It consists of the Chairman, Deputy Chairman and up to seven Board Members appointed by the Council.

The key responsibilities of the Board include implementing the FCMC’s supervisory and regulatory policies, licensing market participants, imposing sanctions, adopting regulations and analyzing markets.

Key Responsibilities and Functions

The FCMC has a broad mandate spanning regulation, licensing, supervision, enforcement and more across Latvia’s financial system:


  • Develops regulations governing financial markets and service providers
  • Sets capital, liquidity, governance and transparency rules
  • Issues legally binding norms like directives and regulations


  • Issues licenses for banks, insurers, brokers and other financial institutions
  • Assesses license applications and compliance with qualification criteria
  • Revokes licenses if qualifications are no longer met


  • Carries out off-site analysis and on-site inspections of regulated entities
  • Monitors risks, governance, capital levels, liquidity, internal controls, etc.
  • Requires remedial actions where deficiencies are identified


  • Investigates regulatory breaches and imposes administrative sanctions
  • Penalizes illegal/unethical market conduct with fines or bans
  • Cooperates with law enforcement on criminal violations

Financial Stability

  • Identifies and monitors systemic risks to the financial system
  • Works to mitigate risks and increase sector resilience
  • Acts as lender of last resort if required

Consumer Protection

  • Handles disputes between consumers and financial institutions
  • Educates the public on rights and safely using financial services
  • Ensures transparency of fees, terms and key information

International Cooperation

  • Represents Latvia in European System of Financial Supervision (ESFS)
  • Participates in supervisory colleges for cross-border banking groups
  • Exchanges information with foreign regulators under cooperation agreements

Supervisory Approach and Methods

The FCMC employs a balanced mix of off-site monitoring and on-site inspections to ensure comprehensive supervision:

Off-Site Supervision

  • Involves regularly collecting and analyzing reports submitted by regulated entities
  • Focuses on financials, capital, liquidity, exposures, transactions, etc.
  • Identifies risks build-up through trend analysis and stress testing
  • Less resource intensive than on-site supervision

On-Site Inspections

  • Planned inspections based on entity’s risk profile and off-site findings
  • In-depth examination of policies, internal controls, records, documents
  • Assesses various risks – credit, market, operational, compliance, etc.
  • Interviews management and engages external experts if required
  • Results in findings, remedial actions, sanctions if serious breaches found


  • Supervisory intensity aligned to entity’s systemic importance
  • Significant institutions face extra capital requirements, closer oversight
  • Smaller entities with less complex operations receive lighter supervision

Risk-Based Approach

  • Supervisory focus driven by assessment of inherent risks
  • Areas with elevated risks get greater attention and scrutiny
  • Helps optimize allocation of supervisory resources


  • Seeks to identify emerging risks and issues through market monitoring
  • Uses stress testing to gauge resilience to adverse scenarios
  • Provides early warning to institutions and activates crisis management plans

Regulated Entities and Markets

The FCMC oversees a wide spectrum of financial sectors and institutions including:


  • Commercial banks, branches of foreign banks
  • Supervises liquidity, capital, asset quality, governance, etc.
  • On-site bank inspections conducted regularly


  • Insurers offering life, non-life, accident, health insurance
  • Monitors solvency, reserves, reinsurance, underwriting, investments
  • Risk-based capital requirements imposed on insurers

Securities Markets

  • Stock exchanges, central depository, brokerages, investment firms
  • Oversees securities issuance, trading, settlements and reporting
  • Anti-money laundering and conflict of interest rules enforced

Pension System

  • Mandatory state and voluntary private pension funds
  • Ensures adequate funding, proper asset management and transparency
  • Licensing and supervision of pension fund administrators

Credit Unions

  • Cooperative deposit-taking and lending institutions
  • Prescribes prudential and governance standards
  • Provides licenses and conducts ongoing off-site monitoring

Payment Institutions

  • Entities providing payment accounts, transfers, card issuance, etc.
  • Checks compliance with capital, liquidity, reporting requirements
  • Oversees security of payments data and infrastructure

The FCMC also supervises other non-bank lenders, insurance and securities brokers, investment managers, financial advisors and more.

Key Regulations and Requirements

The FCMC issues legally binding rules and regulations across the various sectors under its oversight. Some notable examples include:

Capital and Liquidity

  • Minimum capital levels based on Basel III framework
  • Capital conservation and countercyclical capital buffers
  • Liquidity coverage ratio and net stable funding ratio
  • Capital surcharges on systemically important banks

Corporate Governance

  • Fit and proper criteria for managers, directors, owners
  • Limits on exposures to related parties
  • Rules on risk management, audit, compensation
  • Curb excessive risk-taking through remuneration policies

Market Conduct

  • Rules on fair dealing with clients, managing conflicts of interest
  • Ban on market manipulation, insider trading, front running
  • Requirements for transparency of fees, charges and risks

Reporting and Disclosure

  • Regular prudential and statistical reporting to FCMC
  • Public disclosure of financial statements, governance, risks
  • Notification of changes in management, strategy, operations

Anti-Money Laundering

  • Customer due diligence, monitoring, reporting obligations
  • Prohibitions on dealings with shell banks, high-risk jurisdictions
  • Requirement to report suspicious transactions

In addition, sector-specific regulations are imposed on banks, insurers, pension funds, securities brokers and other entities tailored to their business models and risks.

Crisis Management and Resolution

As part of its financial stability mandate, the FCMC has powers to intervene and resolve troubled institutions:

  • Requires prompt corrective action before breaches become severe
  • Can impose early intervention measures like replacing managers, restricting business activities, etc.
  • Triggers resolution process for non-viable firms to minimize systemic disruptions
  • Resolution tools include bail-in of creditors, asset separation, bridge banks, controlled wind-down
  • Acts as the national resolution authority under the EU Bank Recovery and Resolution Directive
  • Cooperates closely with the central bank, ministry of finance and deposit insurance in crisis situations

The FCMC has actively used these crisis management powers during times of financial sector turmoil. For example, during the 2008 global financial crisis, it took prompt corrective actions to stabilize banks and protect depositors.

Reporting and Accountability

Transparency and accountability are key pillars of the FCMC’s governance framework:

  • Submits annual report to the Parliament on activities and financials
  • Appears before the Parliament’s committees to report on financial system and regulatory issues
  • Publicly discloses regulations, consultation papers, supervisory guidelines, warnings and decisions
  • Explains policy stances and measures through speeches, interviews and press releases
  • Conducts public consultations before issuing major regulations
  • Publishes feedback statement explaining how consultation inputs were addressed
  • Maintains a consumer contact point for inquiries and complaints

This high degree of transparency allows stakeholders to stay informed on the FCMC’s work and mission.

National and International Cooperation

The FCMC actively engages with domestic institutions and foreign counterparts:

National Cooperation

  • Closely coordinates with Bank of Latvia on monetary policy, financial stability and infrastructure oversight
  • Exchanges information and consults with the ministry of finance on crisis management and legislative initiatives
  • Has signed cooperation agreements with the State Revenue Service, Corruption Prevention Bureau and other agencies

International Participation

  • Represents Latvia in European System of Financial Supervision (ESFS) committees along with the central bank
  • Part of the European Banking Authority (EBA), European Securities and Markets Authority (ESMA), and European Insurance and Occupational Pensions Authority (EIOPA)
  • Engages with the International Association of Insurance Supervisors (IAIS) and other standard-setting bodies
  • Participates in supervisory colleges for financial groups spanning multiple jurisdictions
  • Has signed MoUs with 50+ foreign regulators to enable cooperation

This extensive collaboration both locally and globally helps the FCMC fulfill its mandate effectively.

Enforcement and Sanctions

To give its regulations teeth, the FCMC actively utilizes its enforcement powers:

  • Can impose fines up to 5% of annual turnover for breaches
  • Issued 36 fines totaling over 3 million EUR in 2020 for compliance failures
  • Can ban individuals from working in financial sector due to misconduct
  • Cooperates closely with the State Police on criminal cases
  • Revokes licenses where serious or repeat violations occur
  • Publicizes enforcement actions to create deterrence

By vigorously enforcing rules, the FCMC aims to raise industry standards and protect consumers. It has fined numerous banks, insurers, brokers and credit institutions over the years for gaps in AML controls, mis-selling products, improper disclosures and other infringements.

Initiatives to Support Innovation and Competition

The FCMC balances its regulatory duties with efforts to enable innovation:

  • Published Fintech and Innovation Roadmap to foster new services and technologies
  • Introduced innovation facilitator role to engage with fintech companies
  • Launched Fintech and Innovation Forum for industry dialogue and feedback
  • Streamlined licensing for niche players and new business models
  • Issues innovation-friendly guidance, like on cloud computing adoption
  • Conducts regulatory sandbox testing of fintech solutions
  • Proportional rules for smaller entities to boost competition
  • Reduced reporting burdens through innovative digital platforms

This flexible, collaborative approach helps add diversity and efficiency to Latvia’s financial landscape.

Looking Ahead

As Latvia’s principal financial supervisor for over two decades, the FCMC has made substantial contributions to the stability and integrity of the country’s financial system.

Looking ahead, the FCMC is focused on responding to emerging challenges and innovations in the financial sector. Key priorities include:

  • Expanding supervisory technology (SupTech) solutions for more efficient data-driven oversight
  • Enhancing cybersecurity resilience as risks grow
  • Increasing monitoring of climate-related financial risks
  • Continuing to implement new international standards and best practices
  • Deepening engagement with European counterparts on cross-border matters
  • Ensuring regulation keeps pace with technology and market developments
  • Maintaining high supervisory and enforcement standards

By embracing new opportunities while vigilantly containing emerging threats, the FCMC will continue working to keep Latvia’s financial system secure, transparent and dynamic.


The Financial and Capital Market Commission is a cornerstone of Latvia’s post-independence financial landscape. Its integrated supervision across banking, insurance and securities markets has helped build a more resilient and well-functioning financial system.

Strict licensing, robust oversight, prompt corrective actions, punitive enforcement and supportive innovation policies are the hallmarks of the FCMC’s work. By continually improving its supervision and regulation in line with international standards, the FCMC will remain a steadfast guardian of financial sector stability.