Latvian central bank promises scrutiny of IT systems in financial sector during 2024

The Latvian central bank (Latvijas Banka, LB) said December 21 that next year it "will pay closer attention to IT security and the availability of financial services" in the banking sector.

"Latvijas Banka has set the financial market supervisory priorities which serve as a basis for the approved and published financial market supervision plan for 2024. It provides for 31 on-site inspections and various off-site activities to gain assurance about the resilience and sustainability of the financial sector and the management of various risks and to make sure that the interests of the customers serviced by these institutions are protected," LB said.

"Market participants need to pay more attention to digital resilience and cybersecurity risks. That is why Latvijas Banka will devote special attention to IT security risks to Latvian financial institutions in 2024, focusing on the management of cybersecurity and third-party (outsourcing) risks," said Santa Purgaile, Deputy Governor of Latvijas Banka.

Five financial market supervisory priorities have been set for 2024: good governance, operational and financial resilience, business model sustainability in a transition economy, risks related to money laundering and terrorism and proliferation financing (ML/TPF) and sanctions risks as well as the market conduct risk.

In 2024, Latvijas Banka plans to carry out 19 on-site inspections in the area of prudential (safe practice and prudent risk) supervision, 7 inspections relating to the prevention of ML/TPF and to sanctions and 2 inspections in the area of IT.

Additionally, Latvijas Banka's supervision personnel will participate in the inspections conducted by the European Central Bank (The on-site inspection plan of the European Central Bank is not publicly available). 

By segment, the inspections planned for 2024 are as follows: 16 on-site inspections at banks, 2 inspections in the insurance sector, 1 – in the area of pensions, 3 – in the area of investment, 1 – in the area of payment services, 4 – at investment firms, 2 – at cooperative credit unions and 2 – at foreign exchange companies.

However, tha bank also suggested  that the concerted effort to clean up Latvia's banking sector and shed an earlier reputation as a money-laundering hub might have resulted in "excessive caution" among some market participants. 

"Over the past years, the risk level of ML/TPF has fallen substantially for Latvian financial institutions, and their internal control systems have been strengthened considerably; therefore, the introduction of a risk-based approach has to be continued at this point in time. The work accomplished by Latvia in this area has been commended in the international arena; however, excessive caution practised by credit institutions results in problems related to the availability of financial services. Latvijas Banka will assess the ML/TPF risk management practice at financial institutions next year, and its inspections will also focus on the provision of services to low-risk customers as the availability of financial services is our priority," said LB.

Latvijas Banka's supervisory priorities for 2024 are available here and the publicly available part of the financial market supervision plan for 2024 is available here.


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