2024-04-17 02:25:38
The annotation of the draft law states that cashless payments will increasingly become the main means of payment in Latvia. However, despite the increase in non-cash payments, cash payments are still relevant – according to the data of the Bank of Latvia’s “Payment Radars” survey, in February 2024, cash payments accounted for 23% of daily payments on average.
The Ministry of Finance (FM) explains that the importance of cash availability is increasing in situations where payment systems are not available, while the cash infrastructure is significantly decreasing, including the number of credit institution branches and settlement centers where it is possible to receive cash has significantly decreased in recent years.
In general, since the end of 2013, the number of branches of credit institutions has decreased by 91.5%. According to the data of the Bank of Latvia, at the end of 2013, the number of customer service points for credit institutions was 319, while in May 2023 – 77 points, of which cash payments were provided in 27 customer service points.
Despite the fact that ATMs of credit institutions have become the main source of ensuring access to cash for citizens, their number is also decreasing. According to the data published by “The European Association for Secure Transactions” (EAST), on June 30, 2023, there were 4.9 ATMs per 10,000 inhabitants in Latvia, which is one of the lowest indicators in Europe.
In order to implement measures to ensure the availability of cash for Latvian citizens, the Bank of Latvia, the Latvian Financial Industry Association and the four largest credit institutions with the largest ATM networks in Latvia signed a cooperation memorandum in September 2021, which set the minimum requirements for the availability of cash payment services, including certain restrictions on reducing the ATM network. In the fall of 2022, the validity of the requirements specified in the memorandum was extended until January 1, 2024. The memorandum was developed for the purpose of promoting goodwill, it has no legally binding force and the consent of all parties is required each time to amend the requirements set out in it or to extend the validity period.
Therefore, in the opinion of the FM, it is necessary to take measures in Latvia that would ensure sufficient access to cash payment services, because cash as a means of payment must be able to provide a viable alternative to cashless payments.
The FM states that until now the regulatory acts did not foresee a clearly defined obligation for credit institutions to ensure the availability of the cash payment service on a daily basis.
The draft law envisages supplementing the Law on Credit Institutions with an article, the first part of which defines the criteria for determining those credit institutions that play a significant role in ensuring the availability of cash in Latvia (significant credit institutions) and to which the obligation laid down in the Law on Credit Institutions to ensure that the cash payment service provided to the client meets certain requirements is applied .
As the first criterion for determining significant credit institutions, the condition that the credit institution in Latvia provides payment account-related services to residents-consumers of the European Union is provided. As the second criterion for determining significant credit institutions, the condition that the number of customer payment accounts opened in the credit institution on December 31 of the previous year constitutes at least 5% of the total number of payment accounts in credit institutions registered in Latvia, branches of foreign credit institutions in Latvia and branches of credit institutions registered in other member states in Latvia.
As the third criterion for the determination of significant credit institutions, the condition that the deposits of domestic households in the credit institution on December 31 of the previous year constitute at least 5% of the total deposits of domestic households in credit institutions registered in Latvia, branches of foreign credit institutions in Latvia and branches of credit institutions registered in other member states in Latvia.
In the current market situation, the four largest credit institutions operating in Latvia in terms of the number of customer payment accounts and the volume of domestic household deposits are recognized as important credit institutions, namely AS “Swedbank”, AS “SEB banka”, AS “Citadele banka” and the Latvian branch of “Luminor Bank”, which according to the regulations of the Bank of Latvia, there are also providers of critical financial services.
Other credit institutions operating in Latvia are currently not close to the thresholds of the quantitative criteria defined in the draft law, which allows the FM to predict that in the near future, changes in the circle of credit institutions meeting the criteria of significant credit institutions are not expected.
Also, until now, there are no requirements in the regulatory enactments regarding the main tool for providing the cash payment service – ATMs. The FM draws attention to the fact that the currently valid legal acts do not set requirements for credit institutions regarding the geographical location, number, minimum operating time of ATMs, as well as the limits of cash that can be withdrawn without commission, thus not limiting the freedom of action of credit institutions in providing essential services to the public.
In the last decade, the range and availability of face-to-face services provided by credit institutions has significantly decreased in many places in Latvia. This has created a significant risk of availability or even disappearance of cash payment services, the FM admits.
The draft law envisages supplementing the Law on Credit Institutions with an article that sets requirements regarding the geographical location, number and minimum operating time of ATMs, as well as the limit of free availability of the cash withdrawal service at ATMs. The draft law provides for the types of requirements to be determined for the cash payment service, but the determination of their numerical values and permissible deviations is expected to be delegated to the Bank of Latvia.
Therefore, the draft law stipulates that at a distance determined by the Bank of Latvia from any place in the territory of Latvia, the customer has access to at least one ATM provided by a credit institution, where the customer can receive cash withdrawal service.
In a situation where residents of a certain territory of Latvia will not have access to an ATM of any major credit institution within the distance determined by the Bank of Latvia, each major credit institution which, when assessed individually, will not fall within the permissible deviations set by the Bank of Latvia, will have a mandatory individual obligation to install an ATM. Such an obligation will exist as a minimum until the ATM is installed by another significant credit institution and the significant credit institution, which does not have its own ATM in the relevant territory, ensures that its customers can also receive cash withdrawal services at the relevant ATM under equivalent conditions.
The number of ATMs provided by major credit institutions in Latvia must not be less than the number specified by the Bank of Latvia, ATMs must be accessible to the customer and must operate during ATM working hours specified by the Bank of Latvia.
Latvijas Banka, when determining the numerical size of the specific requirement, will take into account the number of customers of the significant credit institution and the assessment of the Bank of Latvia regarding the sufficiency of the infrastructure capacity of the cash payment service to ensure the cash payment service in the event of a rapid increase in demand.
The draft law also stipulates that the credit institution provides its customer – a natural person to whom the credit institution has issued a payment card – cash payments in the amount of services, which is not less than the monthly limit and number of payments set by the Bank of Latvia, free of charge.
It is expected that the Bank of Latvia will determine the numerical values of the mentioned requirements, the permissible deviations in their fulfillment, the conditions of application and the procedure by which the Bank of Latvia will check compliance with the mentioned requirements, as well as the requirements, the deadline and the procedure by which credit institutions will prepare and submit information to the Bank of Latvia in connection with the fulfillment of the mentioned requirements .
At least once every two years, the Bank of Latvia will review the numerical values of the mentioned requirements, the permissible deviations in their fulfillment and the conditions of application, taking into account changes in the demand for the cash payment service, the types and alternatives of providing the cash payment service on the market, as well as the assessment of the Bank of Latvia regarding the cash payment service. the adequacy of the location and capacity of the cash disbursement service infrastructure for providing the cash disbursement service in the event of a rapid increase in demand.
If the major credit institution does not ensure the availability of ATMs in accordance with the established requirements of distance, number or working hours, or does not provide its customer – a natural person to whom the credit institution has issued a payment card – cash disbursement services in the prescribed amount free of charge, the Bank of Latvia will be entitled to impose a sanction – a warning or a fine – on the credit institution. money up to 50,000 euros.
2024-04-17 02:25:38