The Republic of Latvia Law "On Banks" determines the legal status of commercial banks and other credit institutions and regulates their activities within the territory of Latvia.
. Terms used in this Law
Credit institutions are specialized entrepreneurial associations (enterprises) whose main function is to perform banking operations.
Banking operations include the circulation of money, payment transactions, deposit and credit operations.
Commercial bank is a credit Institution which performs banking operations and which is formed by utilizing the free financial resources of physical persons and legal entities through their participation and investment.
Local government savings bank is a credit institution which is formed by the city or rural district local government in order to serve the depositors who are residents in their territory.
Pawnshop is a credit institution which grants short-term loans secured with personal property collateral.
Credit union or Savings and loan union are credit institutions which operate in accordance with the August 6. 1991 Republic of Latvia Law "On Cooperative Societies" (Republic of Latvia Supreme Council and Government Reporter, No. 35/36, 1991).
Private bank is a private credit institution established to perform credit operations which are part of bank responsibilities.
Article 1
The Republic of Latvia banking system is comprised of the central bank of the Republic of Latvia (the Bank of Latvia), commercial banks and other credit institutions (local government savings banks, pawnshops, credit unions, savings and loan unions and private banks).
Article 2
The control of commercial bank and other credit institution activities in Latvia is performed by the Bank of Latvia.
Article 3
Commercial banks and other credit institutions established in the Republic of Latvia are legal entities. These banks and institutions function in accordance with their own statutes, Republic of Latvia laws and Bank of Latvia directives.
Article 4
In accordance with this Law and the Republic of Latvia Law "On the Bank of Latvia", the Bank of Latvia issues regulations binding for commercial banks and other credit institutions, as well as for other physical persons and legal entities on all issues concerning banking operations.
Article 5
Commercial banks and other credit institutions ensure their permanent readiness to fulfill their liabilities in a timely manner and to the fullest extent, observing the proportions determined by the Bank of Latvia between the capital of the bank and the deposits.
Article 6
Commercial banks and other credit institutions are not liable for the obligations of the State. The State is not liable for commercial bank and credit institution obligations except in the cases when the State and the bank or institution assume such liability.
Article 7
Commercial banks and other credit institutions must guarantee the secrecy of their client and correspondent accounts, deposits and operations. It is the duty of all credit institution employees to keep deposits and operations secret. The bank employee is held responsible for any divulgence of secrecy, in accordance with the existing Republic of Latvia laws.
Article 8
In the cases stipulated by Republic of Latvia laws, information about the accounts and transactions of legal entities can be submitted to the legal entities themselves, their higher institutions, as well as to courts, the prosecutor's office and to the Finance Inspection Service. Information about loan accounts can be submitted to authorized persons of the Bank of Latvia.
Article 9
Information about the accounts and deposits of physical persons can be submitted to the clients themselves, to their legal representatives, as well as:
1 ) to courts and the prosecutor's office. if this information is necessary
for criminal or other cases where possible property confiscation is stipulated
by law;
2) to courts and the prosecutor's office, if this information is necessary
for a criminal case; for a civil case in which a civil claim has stemmed
from a criminal case; for a civil case on alimony payments (if there is
no salary or other property from which alimony can be paid); for a civil
case for the division of a deposit which is the common property of a married
couple; and for a civil case concerning a debtor's insolvency and bankruptcy;
3) to courts, notary offices and foreign consular offices, if this information
is necessary for cases of inheritance concerning the accounts and deposits
in the event of the depositor's death; and
4) to the Finance Inspection Service in cases of unpaid taxes and duties.
Article 10
The financial resources and other assets of legal entities which are held in commercial banks and other credit institutions can be frozen only with a court verdict or a prosecutor's sanction, however, the resources and assets can only be seized with a court order, as well as on the demand of the Finance Inspection Service in the cases foreseen by Republic of Latvia laws.
Article 11
The deposits and other assets of physical persons which are held in commercial banks and other credit institutions can be frozen only with:
1 ) a prosecutor's sanction or court verdict in criminal cases; and
2) a court verdict on claims that have stemmed from criminal cases, claims
on alimony payment (if there is no salary or other property from which
the alimony can be paid), or claims for the division of a deposit which
is the common property of a married couple.
Deposits and other assets of physical persons can be seized based upon a court verdict:
1 ) in a criminal case or a civil case in which a civil claim has stemmed
from a criminal case;
2) in claims on alimony payment (if there is no salary or other property
from which the alimony can be paid);
3) in claims for the division of property, which is the common property
of a married couple; and
4) in claims concerning a debtor's insolvency and bankruptcy.
Article 12
Commercial banks and other credit institutions submit their balance sheets and reports to the Bank of Latvia and publish them in accordance with the forms and terms stipulated by the Bank of Latvia. The respective credit institution is held responsible for the accuracy of published information. The press publication in which this information must be published is determined by the Bank of Latvia.
Article 13
The commercial banks, credit institutions and other legal entities which are listed in the Republic of Latvia Register of Enterprises, can-purchase and sell foreign currency through entrepreneurial activities only with a license issued by the Bank of Latvia to the bank, institution or legal entity for this purpose.
Commercial banks and other credit institutions can perform operations with precious metals and their manufactured articles only after a Bank of Latvia license has been issued to the bank or institution for this purpose.
Article 14 Only commercial banks or other credit institutions that are authorized to perform bank transactions in accordance with this Law can use the words "bank", "credit institution" or their combination in the name of an entrepreneurial association (enterprise) or for advertising purposes.
Article 15
In Latvia there may be State, local government and stock-holding banks, with or without foreign capital.
Article 16
The Republic of Latvia Council of Ministers is the founder of the State commercial banks. The respective local government is the founder of the local government commercial banks.
Physical persons and legal entities of the Republic of Latvia may be the founders of other commercial banks. Foreign individuals and legal entities may participate in the establishment of Latvia's commercial banks.
Article 17
Commercial banks and other credit institutions, as well as their subsidiaries and representations, may begin activities upon the receipt of a license from the Bank of Latvia and upon registration with the Republic of Latvia Register of Enterprises.
The Bank of Latvia determines the procedure for registering and issuing licenses.
The Bank of Latvia functions concerning the supervision and control of the activities of commercial banks and other credit institutions are regulated by Chapter III of this Law, as well as by the Republic of Latvia Law "On the Bank of Latvia".
Article 18
When granting loans against personal property (goods), commercial banks have the right to leave the property accepted as security (collateral) for the borrower's own utilization or for safe-keeping by making a list of the property which must be signed by both contracting parties and witnesses. The Republic of Latvia Civil Law regulates the bank's mortgage of real property.
Article 19
All bank claims against the debtor, with exception of mortgage claims. are paid prior to all other claims. Bank claims must be paid after the payment of alimony claims.
Bank claims must be paid in full, even when the debtor is recognized as insolvent.
Article 20
Commercial banks have the right to perform the following transactions:
1) to discount bills of exchange and other term 'obligations;
2) to grant short-term and long-term loans;
3) to accept deposits of money and other valuables for storage;
4) to purchase and sell bills of exchange, bank and other drafts, foreign
currency, securities, precious metals and their manufactured articles,
cheques, as well as to issue bank and other drafts and cheques to their
foreign correspondents in accordance with the instructions confirmed by
the bank itself;.
5) to issue letters of credit and perform money transfers, as well to charge
commissions:
6) to perform transactions upon the Instruction of State institutions;
7) to perform leasing and factoring operations;
8) to perform State budget execution operations; and
9) to perform other specific bank transactions if they are permitted by
the statutes of the bank.
Other credit institutions perform banking operations in accordance with their own statutes.
Article 21
Commercial banks and other credit institutions perform operations concerning State (local government) budget resources without charge.
Article 22
Commercial banks and other credit institutions independently determine interest rates for their lending and borrowing operations.
Article 23
Commercial banks and other credit institutions keep mandatory reserves in the Bank of Latvia. Their quotas are determined and may be modified by the Bank of Latvia.
Article 24
The Bank of Latvia determines the following economic standards for commercial banks and other credit institutions:
1) the maximum ratio of the total assets to their own capital;
2) balance sheet liquidity ratio;
3) the mandatory reserve quotas; and
4) the maximum amount of risk per borrower.
Article 25
The Bank of Latvia has the right to suggest the liquidation of the commercial bank or other credit institution if:
1) it has become insolvent;
2) it has violated laws, its own statutes or the Bank of Latvia regulation,
as well as if it has provided false information; or
3) it has not begun its business within one year from the receipt of its
license.
The Bank of Latvia may revoke a license that has been issued for the purchase and sale of foreign currency, or for bank and other credit operations with precious metals and their manufactured articles, if the Bank of Latvia's determined general procedures for such purchases and sales or for the execution of operations is violated.
Article 26
The Bank of Latvia audit service, or upon its authorization, a special audit service, performs the audit of the activities of the commercial banks and other credit institutions, no less than once a year, with the purpose:
1) to prevent financial instability which arises if a commercial bank
or other credit institution performs risky operations or if it grants credits
without the required security;
2) to inspect whether the credit Institution observes Republic of Latvia
laws and Bank of Latvia regulations; and
3) to Inspect accounting records and summaries.
The results of the inspection are to be presented to the credit Institution's leadership in writing, stating the main violations and necessary changes in the future activity and credit policy of the credit institution.
If a commercial bank or other credit institution does not agree with the inspection results, it may file a complaint with the Bank of Latvia Council, which has the right to order a new audit or to change the indications made as a result of the audit.
If the credit institution is not satisfied with the Bank of Latvia Council decision on the audit results, the Institution has a right to request a review of the Council decision In court.
A.Gorbunovs
Chairman, Supreme Council
Republic of Latvia
I. Daudiss
Secretary, Supreme Council
Republic of Latvia
Riga, May 19, 1992
The authenticity of the translation is confirmed by Secretary of the Supreme Council of the Republic of Latvia. For purposes of interpretation, the original Latvian text is to be regarded as official.
I. Daudiss