In 1991 banking matters were transferred to the Bank of Latvia from Soviet bank officials. Previously, Latvia had its branch of the Soviet State Bank (Gosbank). The central bank has the authority to issue Latvian rubles and regulate the commercial banking sector. There are many banks in Latvia, including the Baltic Transit Bank, Banka Atmoda, Latgale Stocj Commercial Bank, Latvian Credit Bank, Investment Bank of Latvia, and the Latvian Land Bank.
Latvia effectively exited the ruble zone on 20 July 1992. By early 1993 the Bank of Latvia introduced a national currency, the lat. The lat is now fully convertible for capital and current account purposes.
Latvia's banking sector has proved one of the country's most successful industries and also its most controversial. Riga has developed into an offshore financial center, offering numbered accounts and related services, and drawing in a substantial chunk of flight capital from other former Soviet republics. Owing to fairly liberal banking laws in the early 1990s, a large number of banks (54 as of May 1995) had been established. Subsequently, capital and other requirements have been progressively tightened. For existing banks, the minimum reserve requirements have been raised from Ls 100,000 as of 1995 to Ls1.0 million by 31 March 1998. As of April 1995 all banks had to be audited by one of the recognized international accounting firms. The stricter capital regime has led to an inevitable attrition, with 11 banks losing their licenses between 1992 and 1995. Only some 15 banks made profits in 1994 and had adequate reserves. The audits also revealed huge losses at Baltija Bank (Latvia's largest institution, with some 200,000 private depositors), which had been incurred as a result of systematic fraud. Latvian banks suffered heavy losses in 1999 as a result of the Russian financial crisis.
In February 1997, the Bank of Latvia gave its approval to the proposed merger between the Latvian Savings Bank and the United Baltic Bank of Riga. As a result of the merger, the state now owns 75% of shares in the Latvian Savings Bank. The government's plans are to privatize the newly merged entity. Total assets of Latvia's 23 commercial banks were US $5 billion as of June 2001. In recent years, Scandinavian banks have begun acquiring shares in Baltic banks. The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $1.4 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds— was $2.5 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was5.23%. The discount rate, the interest rate at which the central bank lends to financial institutions in the short term, was 3.5%.
There is a stock exchange in Riga.