A five-year term is also to be set for the bank's deputy president and council members, and the same person will be eligible for a maximum of two consecutive terms in all those roles.
"Such a procedure would be in line with generally accepted practice and legislation that provides for the appointment of heads of institutions for a five-year term, previously noted by the chairman of the commission, Martins Bondars, in the Committee on Budgetary and Financial (Tax) Affairs," the Saeima said in a statement.
Currently, the term of office of the Governor, the Deputy Governor or the Council of the Bank of Latvia is six years, which may be held for an unlimited number of terms. Serving Bank of Latvia governor Ilmārs Rimšēvičs, embroiled in a high profile bribery and money-laundering court case, has been in the job since 2001.
The draft law stipulates that Rimšēvičs will be able to perform his duties until the end of his current six-year term or when the Saeima has dismissed him, whichever comes sooner, after which the new rules come into effect.
The Saeima also endorsed the idea of reducing the number of members of the Executive Board from six to four and called for optimization of the Bank of Latvia's administrative management. It is planned that these measures will come into force on March 1 next year.
Proposed amendments to the law also instruct the Cabinet of Ministers by the end of June next year to prepare a plan to integrate the operations of the Financial and Capital Market Commission, the independent financial regulator, with those of the Bank of Latvia.
"The planned merger process will have to respect the independence of the functions of monetary, financial and capital market supervisors and resolution authorities, as required by the law," the Saeima statement said.
In order for the changes to take effect, they still must be approved by the Saeima at a third reading.