or branches in latvia except for prudential requirements, which are the same for domestic and foreign banks. legislation the principal basis - the law “ on credit institutions ” - was adopted in 1995 and incorporates subsequent amendments. the bank of latvia regulations make the requirements set by the law more specific. the whole set of regulations normally used by a supervisory authority is in place and corresponds to eu standards. the regulations apply to minimum initial capital, own funds, capital adequacy ratio, liquidity requirements, large exposures, open foreign exchange positions, loan classification and provisioning. the law against money laundering came into effect on 1 june 1998. the law fully conforms to the respective eu directive : it requires customer identification, keeping records on all transactions, defines suspicious transactions and obliges banks to report them to a special control institution ( disclosures office ). law on deposit guaranties came into effect on 1 october 1998. presently deposits are guaranteed up to the rather moderate level of lats500, however, the law sets a timetable for increasing this amount to the level required by the eu directive. initially the law will cover only natural person deposits, and later on we will apply to legal persons as well. remaining tasks we are currently working on the implementation of two more advanced eu directives, relating to consolidated supervision and capital adequacy. this means that by the end of 1999 the regulatory framework for banking activities in latvia will be completely harmonised with eu requirements. practical supervision banking supervision in latvia is well advanced and among the strictest in central and eastern europe. the bank of latvia has been invited by the eu tacis ( technical assistance to cis ) programme to participate in a major project aimed at bank restructuring in ukraine. currently there are 55 staff members in our credit institutions supervision department. a number of them deal with on - site banking inspections, others with off - site analysis. our inspection teams visit each commercial bank 2 to 3 times per year, in addition to regular audits by external auditors. in 1998, 95 on - site inspections by the bank of latvia took place in latvian commercial banks. compared to western practices, these figures are very high. due to the improvement of analytical skills of our staff, in the future more emphasis, as elsewhere, will be put on off - site analysis, and the frequency of on - site inspections will obviously decrease. as a result of all this work, we have been able not only to set regulations for banks, but also to

ilmars rimsevics : general economic developments and banking in latvia speech by mr ilmars rimsevics, governor of the bank of latvia, riga, november 2002. * * * with latvia's economic indicators confirming sustained stability in the national economy, economic growth is likely to be balanced in 2002. amidst somewhat weak economic activity in the external sector and downward adjustments of global economic growth projections for 2003, latvia continues to report economic growth that is largely driven by domestic demand. the performance of the latvian economy has also been recognized internationally : in november, the rating agency moody's investors service upgraded latvia's credit rating. in its regular report on latvia's progress towards accession, the european commission has acknowledged latvia's macroeconomic stability and positively evaluated reforms undertaken to enhance the country's competitiveness. the european commission has nominated latvia among the ten countries ready for accession to the european union in 2004. inflation remains low : in october, consumer prices rose 1. 6 % year - on - year and 0. 8 % month - on - month. the pick - up in consumer prices was largely a result of seasonal increases in food, and clothing and footwear prices. core inflation was 1. 3 % in october. the inflation rate is projected to be around 2 % in 2002. increasing economic growth rates observed in the third quarter can be attributed to the sustained high level of domestic demand and new orders from external markets. strong production indicators in some of the sectors, marked growth in the retail trade sector, and increases in non - financial investment and lending are all evidence to this. with more orders placed with the manufacturing sector, its real output rose in july and august ( 8. 1 % and 3. 1 %, respectively ). the most pronounced growth of non - financial investment and loans was observed in the manufacturing and construction sectors, as well as some areas of the service sector, mostly in trade, the financial sector, commercial and other services. retail trade turnover continued to increase at a rapid pace in august ( by 22. 5 % year - on - year ), as population's income and loans granted grew and the size of the shadow economy in the retail trade sector declined. although growth in oil product transit by rail accounted for the september increase in cargo traffic by rail, oil transportation by oil main to the ventspils port continued to decline. thus declining transit of oil and oil products restrained a more rapid economic growth. in september, cargo turnover at the