EN ECB -PUBLIC  
OPINION OF THE EUROPEAN CENTRAL BANK  
of 12 June  2019 
on the objectives and  governance of  
the Latvian Financial and Capital Markets Commission   
(CON/20 19/22) 
 
Introduction and legal basis  
On 28 May 2019 the European Central Bank (ECB) received a request from the Latvian Minister f or 
Finance  for an opinion on a draft law amending Law on the Financial and Capital Markets Commission  
(hereinafter the ‘draft law’)1. 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and on the third indent  of Article 2(1) of Council Decision 98/415/EC2, 
as the draft law relates to the Latvijas Banka and to the specific tasks conferred upon the ECB concerning 
the prudential supervision of credit institutions  pursuant to Article 127(6) of the T reaty . In accordance with 
the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing 
Council has adopted this opinion . 
 
1. Purpose of the draft law  
1.1 According to i ts annotation,  the draft law has t wo aims. First, it changes  the procedure for the 
appointment of the members of the Finanšu un kapitāla tirgus komisija (FCMC , Financial and 
Capital Markets Commission)  Council by expanding the qualification requirements, stating the 
maximum term s of office and prohibiting office holders from holding office for more than two 
consecutive terms . Second, it strengthens  the provisions on the prevention of money laundering 
and financing of proliferation and terrorism in the financial and capital markets by expanding the 
objectives and more precisely setting out the FCMC  Council ’s functions . According to the 
annotation, these aims are in line with the Organisation for Economic Co- operation and 
Development ’s short -term recommendations issued for Latvia3 to reinforce the supervisory and 
control mechanism for the prevention of financial system abuse.  The aims also reflect the findings 
of the July 2018 MONEYVAL mutual evaluation report4 on anti -money laundering and counter -
terrorist financing measures in Latvia.  
1.2 The draft law changes Latvijas Banka’s role  in the appointment of the Chair and the members of 
the FCMC Council . The current  Law on the Financial and Capital Markets Commission (hereinafter 
‘Law on  FCMC ’)5 provides that the Chair and Deputy Chair of the FCMC  Council  are appointed by 
                                                 
1 Grozījumi Finanšu un kapitāla tirgus likumā.  
2  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
3  Available on the Organization for Economic Co- operation and Development website at www.oecd.com . 
4  Available on the Financial Action Task Force’s website at www.fatf -gafi.org.  
5  Finanšu un kapitāla tirgus komisijas likums, available at  www.likumi.lv.  
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2 the Parliament upon a joint recommendation of the Governor of Latvijas Banka and the Minister f or 
Finance, and that the other FCMC Council members are appointed by the Chair after coordination 
with the Governor of Latvijas Banka and the Minister for  Finance.  The draft law provides for the 
Chair and all members of the FCMC Council  to be appointed by the Parliament upon a 
recommendation of Ministru kabinets  (Cabinet of Ministers) . The candidates for the positions of 
Chair and FCMC Council members are to be selected in an open competition and evaluated by a 
commission, which , inter alia , includes a member of Latvijas Banka’s Council.  
1.3 The draft law amends the qualification criteria for candidates for the positions of  Chair and FCMC 
Council  members . In particular,  candidates for these positions are required to  have all of the 
following : (a) a university degree in law, economics or financial management ; (b) knowledge of the 
Latvian language and one foreign language;  (c) at least five years’ experience in financial and 
capital market s or the supervision/prevention of money laundering and financin g of terrorism and 
proliferation ; (d) compl iance with requirements to receive a second category special permit for 
access to official secrets. The Law o n official secrets6 has a provision requiring anyone with access 
to secret information to obtain the second category special permit7. This permit will not be granted 
to any  person where,  during the course of the examination,  it is determined that there are doubts 
that this person is not able to and cannot be relied upon to preserve official secrets.  
1.4 The draft law amends existing provisions relating to removing the Chair and FCMC Council  
members  from office . The existing law sets out  four reasons for Parliament to remove these 
officials  from office: ( a) upon the office holder’s own application;  (b) where there is a final 
judgement convicting the office holder  of an intentional criminal offence; ( c) where the office holder 
is unable to perform his  or her  duties for more than six consecutive months due to illness or other 
reasons; and (d) upon a joint application by the Governor of Latvijas Banka and the Minister f or 
Finance.  
1.5 The draft law abolishes the fourth ground for removal and introduces three new grounds for 
removal: ( d) where there has been a final decision that annul s a special permission of access to 
State secrets or downgrad es the relevant category in respect of the office holder ; (e) where the 
Chair of the FCMC Council applies for the removal of an  FCMC Council member who no longer 
complies with the criterion of hav ing an impeccable reputation;  and ( f) where there is an application 
by at least 34 out of the 100 members of Parliament for the removal from office of the Chair of the 
FCMC where he or she no longer complies with the criterion of having an impeccable reput ation. 
The draft law also specifies that all six grounds apply not only in relation to the Chair and Deputy 
Chair of the FCMC, but in relation to any FCMC Council member. If a person is to be relieved from 
office under  grounds  (e) or (f ), the circumstances  of the case will be evaluated by the commission  
referred to in paragraph 1.3, which , inter alia,  includes a member of Latvijas Banka’s Council. The 
decision of this commission may be appealed to the administrative courts. In the absence of an 
appeal to an administrative court, or if an administrative court has ruled in favour  of the 
commission’s deci sion, the final decision on the removal from office on grounds (e) or (f)  is drafted 
by Ministru kabinets  and adopted by the Parliament. The decision of the Parliament is final and 
may not be appealed.  
1.6 The draft law contains amendments relating to the composition and term of office of FCMC Council  
                                                 
6  Likums “Par valsts noslēpumu”, available at  www.likumi.lv.  
7  See Article 11(2) of the Law of Official Secrets . 
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3 members . In particular, the FCMC Council will consist of three members instead of five members, 
as provided in the current Law  on FCMC . The term of office of the Chair and FCMC Council  
members  will be five years , rather than six years as provided in the current  Law on FCMC , and a 
person may not serve more than two consecutive terms. In contrast to the current provisions, 
FCMC Council members may not simultaneously be FCMC Council members and hold positions 
as Dir ectors of FCMC departments.  
1.7 The draft law amends the objectives, functions and responsibilit ies of the FCMC regarding the 
prevention of money laundering, the financing of terrorism and proliferation, and compliance with 
sanctions. The current objectives  of the FCMC are to foster the protection of investors, depositors 
and insured persons and  to foster the development and stability of the financial and capital 
markets. The draft law will add an  objective on the prevent ion of money laundering and financing of 
proliferation and terrorism. The current  functions of the FCMC include the regulation of financial 
and capital markets and controlling the compliance of activities of their participants with laws,  
FCMC regulations and decisions. The draft law will add to these functions by  requiring participants 
in the financial and capital markets to comply with Law on the Prevention of Money Laundering and 
Counter Terrorism Financing8 and Law on International and National Sanctions9 in relation to 
financial r estrictions.  
 
2. Observations   
2.1 The ECB takes note of the changed role of Latvijas Banka in the appointment and removal from 
office of the Chair and FCMC Council  members .  
2.2 Pursuant to Article 127(6) of the T reaty  and Articles 4 and 6 of Council Regulation (EU) No 
1024/201310, the ECB is responsible for the effective and consistent functioning of the S ingle 
Supervisory Mechanism , and the ECB and the national competent authorities (NCAs), including the 
FCMC, are each subject to a duty of cooperation and an obligation to exchange information. Where 
appropriate, and without prejudice to the responsibility and accountability of the ECB for the tasks 
conferred on it by Regulation (EU) No 1024/2013, the NCAs, including the  FCMC, are responsible 
for providing assistance to the ECB, on the terms set out in Regulation (EU) No 468/2014 of the 
European Central Bank (ECB/2014/17)11, with the preparation and implementation of any acts 
relating to the tasks conferred on the ECB under Article 4 of Regulation (EU) No 1024/2013 related 
to credit institutions12, including assistance in verification activities13 14. The ECB understands that 
                                                 
8  Noziedzīgi iegūtu līdzekļu legalizācijas un terorisma finansēšanas novēršanas likums, available at www.likumi.lv.  
9  Starptautisko un Latvijas Republikas nacionālo sankciju likums, available at www.likumi.lv.  
10  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).  
11   Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for 
cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent 
authorities and with national designated authorities (SSM Framework Regulation) (OJ L 141, 14.5.2014, p. 1).  
12  See paragraph 2.1 of Opinion CON/2018/6.  
13  Without prejudice to certain provisions of Regulation (EU) No 1024/2013, NCAs shall carry out and be responsible 
for certain tasks and adopting all relevant supervisory decisions with regard to less signif icant credit institutions or 
financial holding companies. Wherever the ECB is assisted by NCAs for the purposes  of exercising the tasks 
conferred on it by Regulation (EU) No 1024/2013, the E CB and the NCAs shall comply with the provisions set out in 
the relevant Union acts in relation to the allocation of responsibilities and cooperation between competent authorities 
from different Member States.   
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4 the FCMC’s responsibilities in these respects will not be affected by the changes in the FCMC’s 
governance under the draft law.  
2.3 As noted in recitals 28 and 29 of Regulation (EU) No 1024/201315, the supervisory tasks not 
conferred on the ECB, which remain with the national authorities, include the prevention of the use 
of the financial system for the purposes of money laundering (ML) and terrorist financing (TF). The 
ECB should cooperate as appropriate, fully with the national authorities, which are responsible for 
supervising the measures to combat money laundering16. While t he task of supervising credi t 
institutions in relation to the prevention of the use of the financial system for the purposes  of ML or  
TF has not been conferred on the ECB, the outcomes of anti -money laundering and countering the 
financing of terrorism ( AML/CFT ) supervision are import ant to consider for the discharge of the 
ECB’s tasks concerning the prudential supervision of credit institutions under Article 127(6) of the 
Treaty and Regulation (EU) No 1024/2013. In particular, the risk of the use of the financial system 
for ML or TF i s relevant for ECB prudential supervisory decisions concerning acquisitions of 
qualifying holdings in supervised entities (including regarding the process of granting authorisations 
to credit institutions) and fit and proper assessments of existing or pros pective managers of 
supervised entities, as well as for day -to-day supervision in the context of the supervisory review 
and evaluation process. Serious breaches of AML/CFT requirements can negatively affect the 
reputation of a credit institution and lead t o significant administrative or criminal sanctions imposed 
on supervised entities or their staff, and can thus pose a risk for the viability of supervised entities. 
In certain cases, serious breaches of AML/CFT requirements can directly trigger a need for a credit 
institution’s authorisation to be withdrawn17. 
2.4 Taking account of the foregoing, the ECB notes  that the objectives of the FCMC are to be 
expanded and its  functions are to be set out more precisely with the intention of  strengthen ing its 
existing mandate to conduct AML/CFT supervision18. 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main,  12 June 2019 . 
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                                                                                                                             
14  According to the Basel Core Principles for  Effective Banking Supervision, the head of a supervisory authority is also  
to be appointed for a minimum term and removed from office during that term only for reasons specified in law, or if  
not physically or mentally capable of carrying out the role, or  if found guilty of misconduct. See Basel Committee on  
Banking Supervision, Core Principles for Effective Banking Supervision (September 2012), Principle 2, Effective 
Criteria  2 and 6, available on the website of the Bank for International Settlements at w ww.bis.org.  
15  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p.  63). 
16  See also Article 6(2) of Regulation (EU) No 1024/2013 pursuant to which the ECB and NCA s are subject to a duty of 
cooperation in good faith, and an obligation to exchange information.  
17  See paragraph 1.2 of Opinion CON/2018/55.  
18  See Articles  45(1), 46, 47 and 56 of the Law on Prevention of Money Laundering and Terrorism Financing.