Published on "Dienas Bizness", Žanete Hāka, on January 4th, 2018

According to global financial industry forecasts, over the next three years the Latvian banking sector will develop faster than it has during the past 30 years. "The Latvian banking industry is ready for the boost in growth and is already acting in accordance with the highest standards, offering modern and versatile financial services to a wide range of customers, both offline and online", says Sanda Liepiņa, Chairman of the Board of the Association of Latvian Commercial Banks (ALCB).

Strengthening Latvia as an internationally competitive and business-friendly country is one of the ALCB's main goals. Next year the association plans to implement the development strategy for financial services offered by the Latvian banking industry, that would also outline the possible future transformation of business models of Latvian banks. The strategy should also stimulate discussion about the role of the banking sector in creating a value chain in Latvia, the Baltic region and globally.

The ALCB will also continue to support the growth of international financial services, as outlined in the Latvian financial sector development plan. In the beginning of the year we will evaluate development opportunities of financial services (including bank products, services and related sales channels) and make further recommendations based on best international practice in risk management and compliance.

This will help create a common view on the development strategy for Latvian banking services, and spur discussion on the role of the banking sector in creating a value chain in Latvia, the Baltic region and globally, as well as an analysis of potential regulation and policies changes.

"Another important area we will be supporting is the advancement of the international business services sector in Latvia. We believe that Riga has huge potential for providing such services, not yet fully realized. Now is the right time to act and fill that gap in the market share with high-value services. We are working actively with the Ministry of Finance Investment and Development Agency of Latvia, Riga City Council, the Foreign Investors' Council in Latvia and the National Alliance of Real Estate Developers to realize this potential", Sanda Liepiņa explains.

ALCB's main goals and resolutions for the next five years are:

- to work with the international business services sector's current and potential representatives in Latvia to understand their perspective of the business environment and to promote gradual evolution from simpler and potentially automatable functions towards more complicated services that offer higher added value;
- to create 10,000 new jobs in international business services aiming for an average monthly salary of €1,400;
- to develop at least 200,000 square metres of modern office space in Riga, and regionally.

"Our goal is to stimulate banks and other financial companies as well as enterprises in related fields to start offering international business services or expand their existing reach. We are seeing that international business services offered by financial and other companies in Latvia are growing steadily, and Riga has everything needed for their further development, including qualified specialists and the right infrastructure. New office space is also being planned therefore cooperation with banks and other financial companies will be most effective. There are already several international business services centres in the Latvian banking sector which together employ almost 900 people," explains head of ALCB.


2018 will be a year of transformation for digital technology in the financial sector, emphasises Liepiņa. Technology is continuously advancing, providing banks ever more ways to offer clients innovative services and solutions. The Latvian banking sector is open to new ideas, and several players in the industry are investing in analysing new opportunities; testing the use of blockchains, artificial intelligence (AI), robotics, machine learning, chatbots and other innovations. In the next few years we will witness more and more banking solutions that use the latest technologies to make banks' internal processes ever more efficient, and provide even more modern, secure and custom services for clients in Latvia, as well as the entire European Union. A crucial precondition for this is the adequate legal regulation of new financial technologies and harmonisation of legislation across EU member states.

During this year several key new EU-level legislative acts will come into effect: the Payment Services Directive (PSD2), the General Data Protection Regulation (GDPR) and the Regulation on electronic identification and trust services for electronic transactions in the internal market (eIDAS) that will open unprecedented opportunities for local financial market participants to offer services in the single European market - the second largest market in the world. We already see banks starting to adopt the opportunities provided by PSD2: open banking platforms currently allow for open collaboration between banks and FinTech companies, thus paving their access to 11 million clients in the EU and Northern countries. Open Banking allows banks and their partners to jointly create new solutions that are convenient for clients and effective for businesses. Next year we will deepen our cooperation with FinTech start-ups and expect to see the first fruits of these new collaboration opportunities.
Another important dimension for banks is the implementation of the Data Driven Nation project in Latvia. To understand the effectiveness of the existing collaboration we have analysed various models of collaboration between financial companies and state registries in the industry. Together with representatives of the industry we are currently developing our proposals for effective data exchange between companies and government to optimise the use of administrative and financial resources, to improve the exchange of data and to extend the benefits to banking clients - private individuals and companies.


A responsible approach to, and compliance with the highest standards is the foundation for growth and development. Over the next year banks will continue to strengthen their internal control systems, train staff and comply with the highest standards to reach ALCB's goal: to reach the highest level of compliance with anti-money laundering and counter-terrorist financing standards within 2-3 years. The AML/CFT policy and guidelines, approved in 2017 by ALCB, clearly outline the standards that need to be introduced in the industry. The guidelines also help in open communication with? ALCB member resolutions in introducing additional procedures to comply with standards.

The training of employees, aimed at real-life risk management skills in line with international standards, will be among the top priorities in compliance. We will continue our cooperation with the Riga Business School, the ACAMS Baltic Chapter and the Baltic Financial Advisors Association in providing training opportunities for professionals in the private and public sectors.
According to the guidelines for self-regulation, approved by the ALCB council in October 2017, financial institutions must? conduct independent external evaluations of their internal anti-money laundering and counter-terrorist financing control systems.

In the area of combating financial crime, attention will be focused on creating and improving collaboration models and channels for efficient information exchange between public and private parties, as well as among private partners. The ALCB will carry out legal research and prepare recommendations to ensure the effective functioning of such models in Latvia, examples of which already work successfully in other financial centres, such as in the UK.

In 2018, ALCB committees will work on practical tasks related to complying with the norms of GDPR and the latest additions to the Payment Services Directive. The ALCB will continue to work on data protection guidelines to provide practical assistance in complying with the requirements of the GDPR. The guidelines are planned for approval in early 2018.


Associate members