Cabinet of Ministers approves legislative package for unified financial sector supervision

26.05.2026.

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On Tuesday, May 26, the Cabinet of Ministers supported the package of 13 draft laws prepared by the Ministry of Finance in cooperation with the Bank of Latvia for the implementation of the reform of supervision over consumer lenders. As a result of the implementation of the reform, a unified supervision model is planned to be introduced, which will be more efficient, reduce the administrative burden, eliminate duplication of functions, and promote fair competition conditions.

The Cabinet of Ministers supported the concept of the reform on March 17, when reviewing the information report prepared by the Ministry of Finance, which proposed transferring the licensing and supervision functions of non-bank consumer lenders, as well as the protection of consumer rights and interests in the field of financial services, to the Bank of Latvia.

The package of draft laws is based on amendments to the Consumer Rights Protection Law, which provide for the integration of supervision of non-bank consumer lenders and credit intermediaries into the Bank of Latvia, while strengthening the protection of consumer rights in the field of financial services. In addition, the Bank of Latvia will further ensure supervision of unfair commercial practices and advertising in relation to services provided by financial market participants.

To ensure uniform application of the regulation, amendments have also been prepared for several related normative acts, including the Law on Alternative Investment Funds and their Managers, the Law on the Financial Instruments Market, the Law on Investment Management Companies, the Law on the Prohibition of Unfair Commercial Practices, the Law on the Prevention of Money Laundering and Terrorist and Proliferation Financing, the Law on Accessibility of Goods and Services, the Law on Payment Services and Electronic Money, the Law on Advertising, the Law on International and National Sanctions of the Republic of Latvia, the Law on Private Pension Funds, the Civil Procedure Law, and the Law on Crowdfunding Services.

The Bank of Latvia supports the integration of non-bank consumer lenders into a unified financial sector supervision framework to ensure a transparent approach to lender licensing and supervision, reduce fragmentation and bureaucratic burden, promote honest business practices, understandable products and their terms for clients, and protect consumer interests. The non-bank consumer lending sector is growing rapidly, which means that risks will also increase in the future, which must be skillfully monitored and managed. In most European countries, there is exactly such an integrated and centralized supervision model, which is carried out by the financial sector supervisory authority in 17 countries.

When supervising non-bank consumer lenders, the Bank of Latvia will implement a systemic approach, rather than focusing on complaints and violations when they have already occurred and consumers have suffered. The Bank of Latvia currently supervises more than 200 different financial market participants, analyzes their operational risks on a daily basis, and focuses supervision activities on those areas where the greatest risks are concentrated. A risk-based supervision approach can, in many cases, reduce rather than increase supervision activities.

Consolidation of supervision of financial sector market participants: 1) supervision costs paid by companies in this sector will be reduced; 2) fragmentation will be reduced, so consumers will find it easier to defend their rights, while entrepreneurs will have a clearer business environment; 3) more effective representation in international assessments and organizations will be ensured, as there will be one supervision model and one responsible institution. Payments made by market participants to the Bank of Latvia are currently and will continue to be based on the costs necessary for the performance of supervision functions, which is contrary to the current approach of the Consumer Rights Protection Centre.

The new supervision funding model creates savings in supervision costs, as the Bank of Latvia's goal is to collect payments only to the extent necessary to cover supervision expenses. A proportionality principle is planned to be introduced, linking the supervision fee to the volume of the credit portfolio. Currently, the smallest non-bank consumer lending market participants subsidize the supervision of the largest market participants, which, in the opinion of the Bank of Latvia, is not fair. According to the new supervision funding model, supervision costs could increase for only two largest market participants, while for the rest and for the industry as a whole, they will decrease significantly.

The issue of creating a single consumer lender supervisory institution has been assessed in a long-term inter-institutional consultation process lasting almost a year. To discuss in more detail various aspects of the change of supervisor, the Bank of Latvia established five thematic working groups with representatives of the non-bank consumer lending sector and the Fintech Latvia Association on the following areas: 1) prevention of money laundering; 2) credit risk and consumer creditworthiness assessment; 3) governance; 4) advertising restrictions; 5) information disclosed in the contract and its content. The Bank of Latvia is open to dialogue and is convinced that answers will be found to all questions, as the Bank of Latvia relies on the regulation established by the legislator, assesses the industry within a unified supervision and financial stability framework, and is focused on solving problematic issues in cooperation with the industry.

The Bank of Latvia has met with the Latvian Consumer Rights Protection Association and the Latvian Borrowers Association to discuss the main problems of the non-bank consumer lending sector. The Bank of Latvia confirms that the focus on the protection of consumer rights will not decrease and the functions of protecting consumer rights in the financial sector will be taken over and performed in full, carefully delving into the problem, evaluating applications and making proposals for improving the regulation.

The draft laws still need to be adopted by the Saeima.