Novel banking licence in Latvia could pave the way for new market entrants

Amendments to the Credit Institutions Law, which entered into force on 6 January 2026, introduce a new category of financial market participant in Latvia — specialised credit institutions.

Under the new licence, such institutions will be able to operate similarly to traditional banks, but with a lower initial capital requirement — at least €1 million (compared with €5 million for traditional banks) — and will be able to take deposits and operate across the European Union.

“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," says Tīna Lūse, managing director of Fintech Latvia Association. “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.”

Specialised credit institutions will be able to provide a wide range of financial services — including taking deposits, issuing loans, providing leasing and payment services, as well as investment, crypto-asset and other financial services.

The framework. modelled on a sinilar system that is operational in Lithuania, is primarily intended for digital, innovative or providers serving specific client segments. Although the capital requirement is lower, these institutions will be subject to supervisory, risk management and financial stability requirements similar to those applied to traditional banks.

According to industry observations, several market participants — including fintech companies, payment institutions and non-bank lenders — are assessing the possibility of applying for the licence.

Inese Rendeniece, head of banking, finance and fintech practice at BDO Latvia, states: “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.”