Bank of Latvia

We study heterogeneity in households' credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-24 using granular credit register data. We first document substantial between- and within-country variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB's recent tightening cycle to household borrowing costs, and assess its heterogeneous impact across households. Pass-through is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities are associated with stronger pass-through in both credit markets.

This paper examines the effects of macroeconomic and budget balance shocks on public debt trajectories in the euro area. Country-specific SVAR models are used to identify various shocks, which are subsequently incorporated into local projection models that use panel data to estimate the impulse responses. The analysis indicates that a positive GDP shock leads to a persistent decline in the debt-to-GDP ratio, while a positive GDP deflator shock reduces the debt ratio only temporarily. A positive interest rate shock results in a substantial and lasting increase in the debt ratio. A positive primary balance shock lowers the debt ratio considerably, albeit with a lag of around one year. There is evidence of state-dependent and non-linear effects. A positive primary balance shock is more effective in reducing debt after periods of economic expansion than after recessions, and more effective when the initial public debt is low than when it is high. Moreover, a positive GDP shock reduces the debt stock to a larger extent when the debt stock is large than when it is low.

This study is the first to investigate the impact of the term structure of public debt on fiscal sustainability. We adopt the widely used backward-looking measure of fiscal sustainability-fiscal responsiveness as proposed by Bohn. Using data from De Graeve and Mazzolini and focusing on a sample of 19 most developed countries, we demonstrate that sovereign borrowing with maturity above 10 years significantly reduces fiscal responsiveness. Conversely, public debt with maturity between 3 and 5 years is associated with the highest responsiveness of the primary balance to public debt. The findings indicate that the increase of long-term public debt since the beginning of this century has contributed to reducing fiscal responsiveness by half. Furthermore, unconventional monetary policy, by suppressing yields at longer maturities, has likely played a key role in the discovered relationship.

This paper examines Latvia’s FinTech ecosystem as a case of small-market adaptation to technology-driven change in the financial sector. It develops and applies an Ecosystem Effectiveness Model that connects enabling capacities (technological readiness, institutional collaboration, regulatory environment and market adoption) with outcome dimensions of competitiveness, profitability, innovation and resilience. The study draws on a bibliometric mapping of FinTech research and on micro-level evidence from the 2025 Bank of Latvia Innovation Survey, using principal component analysis, cluster analysis and logistic regression to profile ecosystem actors and their innovation behaviour. The results demonstrate that Latvia has achieved relatively high Application Programming Interface penetration, growing use of artificial intelligence (AI) in compliance and analytics, and structured FinTech– bank cooperation, supported by innovation-oriented regulation and access to payment infrastructure. At the same time, gaps in deep-tech scaling, venture capital availability, talent and international promotion could limit improvements in ecosystem performance. By situating Latvia’s experience within broader European FinTech dynamics, the paper demonstrates how small economies can design policy and governance arrangements to convert ‘secondgeneration disruptors’ (eg AI, tokenisation) into focused, resilient specialisation paths rather than scale-based competition. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.

Digital transformation in the financial sector has increased dependence on information and communication technology (ICT) third-party service providers, creating concentration risk and resilience challenges. This paper proposes a quantitative method for measuring concentration risk using Register of Information (RoI) data required under the Digital Operational Resilience Act (DORA). As standardised reporting does not provide calculation approaches for quantifying concentration risk, this paper addresses the gap by developing a method that measures: (1) provider dependence, (2) service-type concentration and (3) subcontracting exposure. The method structures dependencies between providers, ICT service types and subcontracting levels and links them to critical or important functions. It also applies risk weights based on substitutability and impact of discontinuation. The results show that RoI data can be used not only as a compliance artefact, but also as a computable dependency model that supports residual risk assessment and mitigation prioritisation.