One major priority for the Bank of Latvia should be responsibility over the stability of the financial system, said potential candidate for the post of the Bank of Latvia and ex-chairman of the Finance and Capital Market Commission (FKTK) Uldis Cerps.
The contender for the important post said it was highly important to outline this responsibility in the Law on the Bank of Latvia, as well as perform it more actively in practice. Cerps stresses that Latvia’s financial system has many challenges to overcome. This includes approximately ten banks having to change their business models, because it is necessary to refocus away from servicing high-risk non-residents.
All three institutions – Bank of Latvia, FKTK and Finance Ministry – have to work ensuring stability of the financial system, says the potential governor of the Bank of Latvia.
According to what FKTK Santa Purgaile said, five banks had to perform risk reduction activities, said Cerps. He says in this context the Bank of Latvia needs to provide a vision on what needs to be done to reduce systemic risks.
Time-wise the most topical priority is quickly restoring the reputation of the Bank of Latvia, says Cerps. He adds 45% of residents trust the Bank of Latvia, but this index could be higher.
It is also necessary to improve the management of the Bank of Latvia, as well as increase the variety of opinions in the council of the Bank of Latvia, said the candidate. Before learning of the council’s work in more detail, he refrained from commenting how this could be done technically.
Cerps notes it is necessary to work on increasing efficiency of the operations performed by the Bank of Latvia, because its operations are rather expensive. As an example, the ex-head of FKTK mentioned Estonia’s Central Bank, where maintenance costs are EUR 16 million below those of the Bank of Latvia.
He also notes the number of employees in the Bank of Latvia is larger than in Sweden’s central bank even though the population of this country exceeds that of Latvia five times and its financial market is 30 times larger than Latvia’s market. When asked if this meant firing employees, Cerps said he could not comment on this because it was first necessary to perform analysis of the bank’s operations. (BNN/Business World Magazine)
