The Bank of Latvia

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Bank of Latvia

Oversight of the Securities Settlement Systems

The Bank of Latvia is interested in smooth operation of the securities settlement systems of Latvia  (hereinafter, the Systems), as it is necessary for the successful implementation of the monetary policy, smooth operation of the payment systems and stability of the financial market. In order to ensure smooth operation of the Systems, the Bank of Latvia performs oversight of the Systems.

As to the nature and aim, the oversight and supervision functions are different. The aim of the institutions performing oversight of the Systems is to assess the operation of the Systems, to identify the potential risks and to support the reduction of these risks. In System oversight, the Bank of Latvia cooperates with other central banks and the Financial and Capital Market Commission, whereas supervision is concentrated on the regulation and control of individual financial market participants. The supervision of the financial market participants (the Riga Stock Exchange, the Latvian Central Depository, securities custodians etc.) in Latvia is performed by the Financial and Capital Market Commission.       

In 2006, the Council of the Bank of Latvia approved the "Oversight Policy for the Securities Settlement Systems of Latvia", establishing the role and tasks of the Bank of Latvia concerning System oversight. The Bank of Latvia oversees the operation of DENOS, the securities settlement system of the Latvian Central Depository, and VNS, the Bank of Latvia's securities settlement system. The operation of these systems is especially important in the financial market of Latvia. The DENOS ensures securities settlements for the LCD participants' transactions on the Riga Stock Exchange and the VNS for the Bank of Latvia's monetary policy operations.

The Bank of Latvia performs System oversight in line with the recommendations and standards of the international institutions. In 2001, the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) approved the "Recommendations for Securities Settlement Systems". In view of the increasing significance of the securities market and the established requirements for smooth operation of the Systems in the European Union, the European System of Central Banks (ESCB) and the Committee of European Securities Regulators (CESR) have adopted the above Recommendations for the European market, by publishing the "Recommendations for Securities Settlement Systems and Recommendations for Central Counterparties in the European Union" in 2009.