How to obtain a banking license in Latvia

The polity, a Baltic nation situated in Northern Europe, boasts a dynamic and initiated pecuniary field characterised by its rapid enhancement and integration into global trading fields. With its strategic location as a gateway between Western Europe and the Commonwealth of Independent States (CIS), the polity has become a hub for trade, logistics, and innovation.

Key features of Latvia's economy

The polity’s pecuniary field is relatively small, with a GDP of approximately €40 billion (as of recent estimates). However, it is highly open and trade-oriented, relying heavily on exports and imports for pecuniary growth.

The polity joined the EU in 2004 and adopted the Euro as its currency in 2014. EU membership has provided admittance to a single market of over 500 million consumers, boosting trade and speculation chances.

Bordering Estonia, Lithuania, Belarus, and Russia, and with admittance to the Baltic Sea, the polity aids as a crucial transit hub for trade routes connecting Europe with Asia.

Major fields of the Latvian pecuniary field

The services sector dominates the polity’s pecuniary field, accounting for approximately 70% of its GDP. Key areas include:

• Finance and Banking: the polity has a well-developed pecuniary field, offering modern banking aids and attracting transnational financiers.
• Information Technology: The IT field is growing rapidly, with Riga, the fund, emerging as a hub for innovation.

Manufacturing contributes significantly to the polity's pecuniary field, focusing on:

• Wood Processing: The polity has vast forest resources, making timber and wood products key export items.
• Food Processing: Dairy products, fish processing, and beverages are major sub-sectors.
• Machinery and Electronics: The polity produces machinery, equipment, and electrical products for export trading fields.

Agriculture plays a smaller but vital role in the polity’s pecuniary field. Grain, potatoes, and vegetables are the primary crops, while livestock farming is also significant. Organic farming has seen notable growth in recent years.

The polity’s well-connected transport infrastructure supports its role as a logistics hub. Key components include:

• Ports: Major ports like Riga, Ventspils, and Liepāja handle significant cargo volumes.
• Railways: A dense rail network facilitates freight transport to Russia, Belarus, and other neighbouring territories.

Obtaining a banking license in Latvia is a promising opportunity when working in the pecuniary field within the continent. Banking firms can provide a wide range of aid across Europe without separate permits in each polity. This supplies admittance to a market with a large population.

What chances does opening a banking license in Latvia have?

With the authorisation, the bank can provide asset oversight aids, including investment consulting, portfolio oversight, equally brokerage and trust aids. This consents it to work with large clients and develop wealth oversight areas.

The territory also actively supports the enhancement of the fintech field, and pecuniary establishments can offer modern digital solutions such as mobile banking, e-wallets, etc. This expands the chances for functioning with global clients.

Pecuniary establishments with a warrant in the polity can attract deposits from individuals and firms, equally supplying loans and mortgages. This allows them to accumulate assets and provide consumers the opportunity to get credit for a variety of purposes.

Mandated pecuniary establishments in the political system can issue their own pecuniary products, such as bonds, bank certificates, and other instruments for raising cash. This allows them to effectively build their assets and provide interesting investment opportunities to their clientele.

Why choose Latvia for banking?

The territory offers a combination of strategic merits for banking and pecuniary institutions:

1. Strategic location: Positioned at the crossroads of Europe and the Baltic region, the territory is an excellent base for accessing European trading fields.
2. Robust pecuniary and licit infrastructure: The territory’s pecuniary field is regulated, asserting stability and security for endeavours and clients.
3. Favourable statutory sphere: The Latvian authority actively encourages pecuniary field growth while asserting stringent adherence to transnational norms.

Merits of banking licensing in Latvia

This polity, being a member of the EU, supplies admittance to the continent’s pecuniary market. An expat has the prerogative to offer pecuniary aids in the EU, using the principle of a "single passport."

The polity's capital, Riga, regularly hosts transnational pecuniary conferences, underlining its status as a pecuniary centre. These events facilitate the exchange of experience between professionals, attract financiers and consent new pecuniary technologies and solutions to be presented on the transnational stage.

The Latvian tax system is relatively trade-friendly, including moderate CIT rates. Excise exclusions or reduced rates may enroll for certain types of income and under certain provisos.

The territory's regulator, the FCMC, is known for its relatively fast and transparent licensing phase. This attracts firms seeking to access the EU market with minimal time investment.

The territory has implemented EU directives that ensure a high level of customer prerogatives and transparency in the pecuniary market. This helps strengthen the trust of customers and business partners.

Receiving the permit in Latvia admits the possibility of connecting to the SWIFT and SEPA systems, which is important for transnational settlements.

The pecuniary technology field in the territory is actively developing thanks to support from the state and transnational financiers. The polity is home to fintech startups and large transnational firms. They use the territory as a testing ground for their products. The Startup Visa program consents transnational entrepreneurs to initiate a trade in the polity, which helps attract new ideas and speculations.

Although there have been some problems with money laundering in the past, the authorities have significantly tightened the prerequisites for checking transactions and customer data. As a result, receiving the permit supplies additional guarantees of transparency and trust in the transnational arena.

Legislative acts and directives in the banking sector of Latvia

The Credit Institutions Law of the Republic of Latvia is the main statute that regulates the schemes of banking institutions. It defines capital provisos, licensing procedures, organizational norms, peril oversight and reporting directives.

The statute covers issues of corporate governance for companies with a banking license in Latvia, protection of the interests of depositors and regulates procedures for maintaining pecuniary stability in banks.

The Guidelines for Managing Concentration Risk as Part of the Supervisory Process (GL31) aim to ensure that firms identify and assess all aspects of threat without relying on traditional analysis that focuses solely on intra-firm concentrations of threat. The directives are divided into five main sections: threat definition, concentration, general threat oversight principles, supervisory framework, and threat assessment framework.

The Deposit Guarantee Law, which also regulates the schemes of firms that have received a banking license in Latvia, establishes the general principles of guaranteeing deposits in depository institutions, the procedure for the creation, oversight and use of a deposit guarantee fund, equally the procedure for mutual cooperation between deposit guarantee funds.

The Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR) set out capital and threat oversight needs. They enroll in banks and speculation firms in all EU territories.

The Banking Regulation and Supervision Directive (Directive 2013/36/EU, CRD IV) sets out common directives for the banking field in the EU, including licensing sequences, capital models and oversight.

The statute on AML, the CTF and the Proliferation of Weapons of Mass Destruction applies to firms that undertake credit and pecuniary schemes, real estate transactions, supply crypto-asset aids, etc.

Bank licensing sequence and provisos

A firm that has received a Latvian banking warrant has the prerogative to supply fiscal aids in conformance with the Law on Credit Institutions.

What is a credit institution? It is a capital firm that accepts repayable funds from a client base, issues loans and offers various pecuniary aids. The difference from other pecuniary organizations is the prerogative to accept deposits from individuals and licit entities.

The founders of a company with a banking license in Latvia are individuals or licit entities.

License terms

There are few prerequisites for getting the permit, it is worth taking them seriously and abiding with them:

• all members of the firm who play a prime role must have a clean image;
• financiers who own 10% or more of the base capital, in addition to a good image, must be approved and have a stable pecuniary position;
• the base capital must be 5 million euros, and the firm must also supply evidence of funds for 3 years of operation, which corresponds to the trade plan.

Phases for receiving the license

The sequence is undertaken in several phases, including the submission of a request with detailed record, verification of capital sources, assessment of trade image and oversight competencies. Licensing of Latvian pecuniary establishments is undertaken under the oversight of the FCMC in close cooperation with the ECB (for significant pecuniary institutions). This ensures their abidance with high EU norms.

Thus, the licit framework for the warrant is contingent on the integration of national legislation and European ordinances, asserting the reliability of the pecuniary field.

The registration sequence is strictly regulated and includes several phases aimed at verifying the pecuniary stability, reliability and abidance of the applicant with the norms of the EU. Licensing is undertaken under the oversight of the FCMC and, if necessary, the European Central Bank (ECB).

Applicants often face hurdles such as:

• Navigating complex ordinances.
• Asserting detailed and accurate record.
• Managing long timelines for approvals.

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Reasons for refusal

The permit may not be given if the provisos are not met. Therefore, consider all the nuances and pay close attention to the usual rationales for being denied the permit.

In the territory, there are clear provisos for the minimum finance that must be fully paid upon enrollment. Underestimating the needed funds or undercapitalization can be a serious problem.

The polity’s regulators require full transparency regarding bank owners and managers. Failure to supply full information about the origin of funds, trade image or any licit issues may result in a permit being denied.

A trade plan should clearly state the goals, strategies and forecasts, equally the firm's long-term pecuniary stability. The lack of detailed calculations, threat analysis or incorrectly estimated pecuniary flows may result in refusal.

The polity’s supervisory pecuniary commission needs stringent abidance with AML and CFT ordinances. Failure to do so may result in a denial of an authorisation.

We recommend developing a detailed program that includes procedures for identifying suspicious transactions, monitoring and training employees.

A company with a Latvian banking license must have an internal control system to meet prerequisites and effectively manage threats. The absence of such a system or inadequate measures to ensure it may result in a warrant being denied.

The financial model of an enterprise that receives a banking license in Latvia must be adapted to the prerequisites that change in accordance with the market situation. A financial model should be developed taking into account all liquidity and peril factors, equally mechanisms for improving the financial position of the bank.

The sequence of acquiring a monetary dealing warrant in the territory is stringent and requires careful preparation of documents. Transparency of finance sources and a high level of qualification of the team are important. The bank is obliged to abide with stringent statutory prerequisites. This is necessary to ensure stability and customer trust.

Holding a banking license in Latvia entails certain impost obligations. They must abide with both national and European legislation. The main types of levy of banks and financial institutions include: corporate impost, VAT, payroll levy, levies on dividends and payments to expats.

Control and audit of banking schemes after obtaining a license in Latvia

After permission, the activity is monitored in order to abide by all statutory prerequisites and maintain the stability of the pecuniary system. This applies to both the bank's internal procedures and external audits by regulators. Let's consider the main phases and elements of control.

Regulation by the Financial and Capital Commission of Latvia (FCMC)

After receiving a license to conduct banking activities in Latvia, pecuniary establishments are necessitated to abide by stringent prerequisites set by the supervisory pecuniary commision. This includes regular inspections, monitoring of liquidity, finance and other critical indicators.

The supervisory pecuniary commision has the prerogative to conduct audits of the bank’s abidance with applicable ordinances, assessment of pecuniary perils and oversight efficiency, and abidance with transnational norms (e.g. Basel III).

Example: FCMC regularly publishes reports on the Latvian monetary dealing system, which analyze pecuniary stability and abidance with norms.

Internal control of the bank

A company with a Latvian banking license must develop and maintain a control system within the bank, which includes procedures for peril assessment, asserting abidance with statutes, and preventing fraud and money laundering. Pecuniary establishments must have:

• internal audit departments that conduct regular reviews of pecuniary statements and operating schemes;
• independent internal auditors who review pecuniary transactions and ensure abidance with AML and CFT statutes.

Importantly, internal control also helps the bank adapt to alters in the legislative and statutory sphere.

Reports and audit

After receiving a banking license in Latvia, it is necessary to regularly convey reports to the supervisory pecuniary commision, and equally undergo an annual audit by third-party audit firms. These audits cover various aspects of the activity, including abidance with international standards (IFRS), abidance with finance, liquidity and credit peril norms, assessment of perils in the bank's schemes, such as credit perils, market and performance perils.

Example: Auditors need to ensure that a bank complies with the Basel III standard, which includes checking minimum finance and reporting prerequisites.

Periodic stress tests

The supervisory pecuniary commision and other regulators conduct stress tests to assess how a company with a Latvian banking license can withstand a pecuniary shock, such as sharp fluctuations in pecuniary trading fields or a deterioration in the polity's pecuniary situation. These tests help identify weaknesses in the bank's finance model and operating schemes.

Liquidity and capital control after receiving a Latvian banking license

An assessment is made of the pecuniary stability of the institution, its ability to maintain a minimum level of finance, the prerequisites of which may change contingent on the current pecuniary situation and perils.

Periodic testing of a bank's liquidity is necessary to ensure that it can meet its obligations on time, especially in times of pecuniary instability.

Penalties for violations by companies with a banking license in Latvia

There is a stringent statutory system for firms with a Latvian monetary dealing permit. Violation of the statute may result in various sanctions provided by pecuniary regulators such as the Financial and Capital Commission (FKTK) and the Central Bank (Latvijas Banka).

Firms that have received a Latvian banking license and violate the necessities of pecuniary legislation may be fined. The amount contingent on the extent of the violation and the specific situation.

In the event of serious misconduct, such as systematic pecuniary irregularities or failure to abide by statutory necessities, a bank may face suspension or even revocation of its banking license in Latvia. This applies if the firm fails to correct its mistakes within the prescribed time limit or continues to violate statutes.

In the event that a violation of the statute results in pecuniary losses or damage to clients or the system as a whole, the firm is obliged to compensate for the damages.

If a bank fails to manage its own governance or risks, the regulator has the prerogative to intervene in the institution. This may include the appointment of a temporary manager or other administrative measures.

In response to non-compliance with statutory necessities, companies with a Latvian banking license may be subject to restrictions on certain types of schemes, such as issuing loans or conducting large transactions.

If malicious intent or fraud, including money laundering or other criminal offences, is proven, criminal charges may be brought against the firm's oversight.

Charges of obtaining a banking license in Latvia

The phase of obtaining a Latvian banking license entails costs that need to be examined before initiation. In addition to the costs of the initial fund of the enterprise, which must be 5 million euros, there are various fees and costs associated with the enrollment sequence, including licit and advisory aids.

State fees and permit duties

The supervisory pecuniary commision charges a fee for reviewing an enrollment for a Latvian banking license. The amount of these fees may vary contingent on the type of permit and the intricacy of the project, but the basic fee for filing an enrollment for a credit institution permit is approximately 4,000 euros. These fees include administrative costs for checking documents and performing all necessary checks.

Legal and advisory aids

The sequence of obtaining a banking license in Latvia requires significant record and consultations with legal, pecuniary and trade consultants. This includes developing a trade plan, preparing all necessary reports, equally consulting on fund necessities, risk oversight and compliance. The costs of these aids may vary contingent on the consultant.

Audit and conformance costs

After enrolling for a polity’s monetary dealing license, a firm must prepare and convey pecuniary reports and ensure compliance with statutory necessities. It will also need to establish an internal control system and AML protection.

Operating and administrative expenditures

At the initial phase of activity after receiving a Latvian banking license, finances will be needed for renting office space, employee salaries, IT infrastructure and other performance needs. They can amount to several tens of thousands of euros per year, contingent on the scale of the trade.

Main types of levies for banking institutions in Latvia

Corporate levy

In the territory, the principle of deferred taxation of profits is applied, i.e. profit excise is paid only at the moment of distribution of income, for example, when dividends are paid to financiers. If profits remain within the firm for reinvestment, excise is not levied.

The taxable base includes income received by the bank from interest rates, service fees, investments and other sources of profit.

VAT

Exclusion for Latvian banking services: Most traditional pecuniary dealing aids, such as deposit taking, loan provision and payment processing, are exempt from VAT. However, some aids, such as consulting, analytical and information aids, may be subject to VAT.

Levy on dividend distribution with a banking license in Latvia

When distributing dividends to financiers, the bank is necessitated to pay an income levy in the amount of 20%, since the profit becomes taxable at the time of distribution.

When paying dividends from Latvia to transnational financiers, no excise is levied, provided that their polity of residence has an agreement with Latvia preventing double taxation.

Levies on payments to non-residents

Interest income and royalties in Latvia are generally not taxed if paid to licit entities from territories with which Latvia has finalised agreements on the avoidance of double taxation.

Exceptions: If payments are made to non-treaty territories, a withholding excise rate may enroll.

Merits and features of taxation of banks in Latvia

The model consents banks to reinvest funds without paying income excise until dividends are distributed, which affects the sustainable growth of pecuniary institutions.

Thanks to the agreements that Latvia has finalized with more than 60 territories, including EU territories and many others, the excise burden on the income of transnational financiers and the payment of dividends is reduced.

VAT exclusion for most pecuniary dealing aids makes them more accessible to customers and reduces administrative costs for pecuniary institutions

Thus, a favorable excise sphere is offered to organizations with a banking license in Latvia, which includes deferred taxation of profits, VAT exclusion for traditional pecuniary dealing aids and admit to double taxation agreements. This helps to attract transnational pecuniary establishments to the polity and expand the pecuniary field.

An example of a young but successful foreign bank in Latvia is BlueOrange Bank. Founded in 2001 (under the name Baltikums Bank), it managed to quickly obtain a banking license in Latvia and build an image in the transnational market, attracting both private and corporate clients. BlueOrange Bank is focused on transnational pecuniary transactions, fintech aids and modern pecuniary dealing solutions, making it an example of a dynamic and technologically advanced new generation bank.

BlueOrange Bank (formerly Baltikums Bank) received a banking license in Latvia and from the very beginning was focused on transnational clients and SMEs.

The authorization indenture consented to BlueOrange Bank to offer transnational pecuniary aids, including cross-border transfers and speculation solutions to clients from Europe and the CIS territories. The young bank chose a strategy of serving transnational clients and trades, which allowed it to quickly occupy its niche.

BlueOrange Bank then focused on developing fintech aids, including pecuniary market trading platforms, digital cards, e-commerce solutions, and multi-currency accounts. The bank actively cooperates with international payment systems, making it a convenient partner for trades operating in transnational trading fields and requiring flexibility and efficiency in transaction oversight.

In recent years, BlueOrange Bank has focused on supporting start-ups and fast-growing firms, offering them solutions for admitting international trading fields.

It has implemented advanced AML systems. This has helped it successfully integrate into the international banking community and reach the needs for a Latvian banking permit. BlueOrange Bank has developed a risk oversight and asset protection system, which has consented to quickly adapt to EU statutory necessities and ensure a high level of customer data security.

As we can see, it was thanks to obtaining a banking license in Latvia that the bank was able to attract clients from various territories and areas of activity, becoming one of the popular pecuniary establishments for SMEs, equally individuals in need of international pecuniary aids.

Investment prospects

Investing in the finance field and receiving a banking authorisation in the polity for 2025 seems promising due to a number of pecuniary factors and pecuniary provisos.

The pecuniary field remains strong, with pecuniary establishments demonstrating good capitalisation, liquidity and low levels of non-performing loans (NPL). Such resilience suggests a robust pecuniary infrastructure for new financiers, providing confidence in the stability of the Latvian banking sphere.

The polity has made progress in enhancing its pecuniary regulation in line with international norms, particularly in the areas of AML and CFT. This enhances polity’s image among global financiers, contributing to a safer and more transparent pecuniary dealing sphere.

The local authority continues to support speculation via reforms and structural enhancements, including digital techs and anti-corruption measures which create a more financier-friendly climate for pecuniary enterprises.

Macroeconomic indicators of the Central Bank that affect the appeal of activating a banking license in Latvia

Inflation in the euro area continued to decline, as expected. According to the ECB's forecasts, it will continue to decline in 2025, approaching the 2% target set by the ECB Council.

GDP forecasts show an upward trend, with the projected GDP percentage in 2025 and 2026 being 2.6% and 3% respectively.

Tips for a successful enrollment

1. Hire Experts: Engage legal and pecuniary advisors with experience in Latvian banking ordinances.
2. Focus on documentation: Ensure all necessitated indentures are complete and accurate.
3. Create a strong trade plan: Highlight your institution’s goals and strategies.

Alternatives to a full banking permit in Latvia

If getting a full banking permit feels overwhelming, consider alternatives like:

• E-Money Institution License: Ideal for digital payment businesses.
• Payment Service Provider License: For offering payment processing aids.

Sequence for opening a corporate bank account in Latvia

Research and select a bank that aligns with your trade needs. Consider factors like:

• Availability of multi-currency accounts.
• Online banking features.
• Transaction fees and maintenance charges.

Gather all necessitated indentures. Ensure they are translated into Latvian (if necessary) and notarised, as some pecuniary establishments require certified translations.

• Contact the bank to schedule an appointment or enroll online, contingent on the bank’s policies.
• Convey the enrollment form along with the necessitated indentures.

Many pecuniary establishments in the polity require firm representatives to attend a due diligence interview, either in person or via video call. During this interview, the bank will assess the legitimacy of the trade.

The bank will review your enrollment, conduct a background check, and verify all records. The approval sequence typically takes 1–3 weeks but may vary contingent on the intricacy of the enrollment.

Once approved, you will need to deposit the minimum necessitated funds (if applicable) to activate the account. You can then initiate using your corporate account for transactions.

Indentures needed

When enrolling for a corporate account, pecuniary establishments typically require the following indentures:

1. Company incorporation indentures:
   • Certificate of incorporation.
   • Memorandum and Articles of Association.
2. Proof of ownership and oversight:
   • Shareholder register.
   • Information about the directors and beneficial owners.
3. Identification indentures: Passports or IDs of the directors and beneficial owners.
4. Trade plan and description: Detailed information about the firm’s schemes, industry, and expected transaction volumes.
5. Proof of address: Recent utility bills or lease agreements for the firm’s registered office.
6. Bank-specific forms: Fulfilled enrollment forms provided by the bank.

Conclusion

Obtaining a banking licence in Latvia is a promising and strategically advantageous move for both foreign and domestic financial companies. Because of its stable pecuniary field, flexible statutory domain, and favourable excise system, the country has opportunities to expand commerce and admit foreign trading fields. These qualities make the region appealing to multinational speculators and financial institutions looking to extend their operations in Europe and elsewhere.

Receiving the permit does not only supply admittance to the continent’s pecuniary market. It also supplies chances for effective fund oversight, innovative customer service and sustainable business growth.

If you intend to get a permission, please contact our qualified specialists in this field. This will help you prevent mistakes. The process of acquiring the warrant in the polity is fairly intricate, therefore it is best to seek the assistance of professionals.