Banks, Financial Services, Latvia

"A detailed assessment is yet to be done, but there are more potential benefits. One is information exchange - it would be faster and more efficient. The same applies to the perspective and the ability to influence the future development of the financial services market," Kazaks points out. Furthermore, given that qualified professionals are always in great demand, a merger would ensure much better synergies for different types of competencies. Costs would also decrease, he adds.

However, the potential merger of the two institutions also entails several risks that need to be taken into account when making decisions.

"The key is to have a clear separation of functions between monetary policy and financial market supervision," emphasizes Kazaks, explaining that the flow of information and decision-making in monetary policy and financial market supervision must be separated.

The Bank of Latvia manages state strategic investments and also gold reserves, while the financial sector regulator is involved in legal disputes with market players that disagree with the regulator's decisions. Therefore, the law has to state it very clearly that taking over the financial sector supervision will have no effect on the Bank of Latvia's reserves, says Kazaks.

Therefore merging the two institutions will be a very complex process, and before a decision is made on the merger a thorough discussion and assessment of how to balance the benefits with the risks will have to take place.