The Central supervises PARITATE Bank as well as all banks in Latvia Bank, named Bank of Latvia. Regulations are much like European and US Banking regulations. They are very strict, corresponding to the Basle agreement, in many features even stricter and it is Paritate Bank's commitment to follow those. For example, the capital adequacy ratio (described further) under the Basle agreement should be 8%, Bank of Latvia claims 10%, but PARITATE bank's capital adequacy ratio as at the end of 1996 was 22%. This figure, as well as all 1996 financial statement of PARITATE bank, is audited by KPMG, internationally recognised auditor company.

Recently, the credit rating for Latvia has been established by Standard & Poor's agency. A triple-B rating has been assigned to Latvia's long-term foreign currency debt and the single-A-minus rating has been assigned to long-term local currency debt, which is quite a positive assessment.

For more authoritative comments on banking and financial stability in Latvia let me quote Mr. Einars Response (Governor of Bank of Latvia) speech on 'Central an Eastern European Issuers and Investors Forum', organised by Euromoney, held in Vienna, January 21-22, 1997:

  • International accounting standards and international audit requirements have been introduced in the banking system. All the fundamental regulations for commercial banks have been set in accordance with the requirements of The European Union.
  • Our authorities strongly believe in fiscal discipline. The 1996 budget deficit in Latvia was only around 1% of GDP. That is considerably less than in several European Union countries and well below the single currency requirements. The 1997 budget is fully balanced. General government debt is currently about only 15% of GDP, also well below the Maastricht criteria. Besides, the authorities have managed to almost stop it from growing further.
  • The Bank of Latvia is independent both legally and in practice. At the same time, as we can see from the European Monetary Institute "Progress Towards Convergence Report", no central bank in the European Union is regarded as completely independent to fully comply with the Maastricht Treaty requirements. So, we will be glad to bring our central bank law completely in line with the said criteria. Not too much will have to be changed.
  • Standard & Poor's have established the credit rating for Latvia. A Triple-B rating has been assigned to Latvia's long-term foreign currency debt, which grades us slightly above such countries as Greece and Hungary, and well above Russia, Mexico and South Africa. The single-A-minus rating has been assigned to long-term local currency debt, which ranks us alongside other advanced transition economies like Hungary and Poland, which have the same evaluation.

Valeriy Melnikov

Phone: +30-94-39.50.38
Fax:   +30-1-898-3108
E-mail: krono[email protected]

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