Amendments to the Credit Institutions Law, which officially entered into force on 6 January 2026, have created a brand new category of financial market participant in Latvia: the specialised credit institution.
Under the new regulatory framework, these institutions will be permitted to operate similarly to traditional banks. However, they will benefit from a significantly lower initial capital requirement of at least €1 million, a stark contrast to the €5 million standard required for traditional banking licences.
The framework is primarily designed to attract digital, innovative providers, or those serving highly specific client segments.
Expanding capabilities across the EU
Despite the reduced capital barrier, these institutions will unlock substantial operational capabilities. Key permissions under the new licence include:
- The ability to take customer deposits and issue loans.
- The provision of leasing and payment services.
- The capacity to offer investment, crypto-asset, and other financial services.
- The right to passport services and operate seamlessly across the entire European Union.
To ensure market safety, these specialised institutions will still be subject to supervisory, risk management, and financial stability requirements that are similar to those applied to traditional banks.
Early market interest
The introduction of the framework is already generating traction within the local ecosystem. According to the Fintech Latvia Association, at least three to four market participants have already expressed interest in obtaining the licence, and active consultations with the Bank of Latvia are currently underway. Industry observations suggest that fintech companies, payment institutions, and non-bank lenders are among those assessing the application process.
To explore these new opportunities, the Fintech Latvia Association and BDO Latvia recently hosted a discussion attended by approximately 70 industry participants.
Tīna Lūse, managing director of the Fintech Latvia Association, highlighted the broader economic benefits:
“The new framework opens up new opportunities for Latvia’s financial technology companies. It allows them to expand their operations, diversify funding sources and, over time, move towards a full banking licence. At the same time, it can help address long-standing challenges in Latvia’s lending market by strengthening competition, improving access to finance and, over time, lowering borrowing costs. This could make Latvia more attractive for investment and strengthen the international competitiveness of local businesses.”
Inese Rendeniece, head of banking, finance and finTech practice at BDO Latvia, echoed this sentiment:
“We are already seeing growing interest from companies in the fintech and non-bank lending sectors that are evaluating this opportunity. Businesses are particularly drawn to the ability to diversify funding sources through deposit-taking, as well as to expand their operations across the European Union.”
Learning from Lithuania’s success
The strategic move by Latvia mirrors a highly successful model implemented by neighbouring Lithuania. The Lithuanian regulatory framework for specialised bank licences has been active since 2017, acting as a significant growth driver and enabling numerous fintech companies to transition into fully licensed banks.
Vytautas Naruševičius, chief financial officer at Saldo Bank, shared his organisation’s experience with the Lithuanian model: “Obtaining a specialised bank licence enhanced our business model — it enabled us to secure more sustainable and cost-efficient funding and expand our product offerings across multiple markets. Based on our experience, a similar framework could become a strong growth catalyst in Latvia if actively utilised by companies.”
Ultimately, the Latvian government intends for the new framework to encourage the entry of fresh financial market participants, strengthen competition in lending, and foster the development of digital, innovation-driven financial services for businesses and households.
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