Bank of Latvia

Last updated

Bank of Latvia
(Latvian: Latvijas Banka)
Latvijas Banka logo.svg
Bank of Latvia.JPG
Head office in Riga, originally erected for the branch of the State Bank of the Russian Empire
Headquarters Riga
Established7 September 1922 [1]
Ownership100% state ownership [2]
Governor Mārtiņš Kazāks
Central bank of Latvia
ReservesUS$3.05 billion [2]
Preceded by State Savings and Credit Bank
Succeeded by European Central Bank (2014)1
Website www.bank.lv
1 The Bank of Latvia still exists, but many functions have been taken over by the European Central Bank.

The Bank of Latvia (Latvian : Latvijas Banka, [3] ) is the Latvian member of the Eurosystem and has been the monetary authority for Latvia from 1922 to 2013, albeit with a long suspension between 1940 and 1992. [4] It issued the Latvian lats (1922-1940), then a Latvian ruble (1992-1993) and second lats (1993-2013). Since 2014, it has also been Latvia's national competent authority within European Banking Supervision. [5] The Bank of Latvia's administration is located in Riga. [6]

Contents

History

On 7 September 1922, the Constitutional Assembly adopted the Law on the Establishment of the Bank of Latvia. [4] The Bank of Latvia was granted emission rights. The Bank's interim statutes were approved on 19 September 1922, with the decision of the Cabinet of Ministers, and its initial capital was 10 million lats.

On 24 April 1923, Saeima approved the Statute of the Bank of Latvia, signed by President Jānis Čakste on 2 July. The bank was headed by a council and board. The Council consisted of a chairman, a deputy, and 11 members, but the board included a director general, his deputy, and three directors. [7]

On 17 June 1940, Latvia was occupied and was incorporated into the USSR on 5 August. On 25 July, the Law on the Nationalization of Banks and Large Industrial Enterprises was adopted. After the Second World War, both money emission and the Treasury's functions were performed by the USSR State Bank, but the money system of the Latvian SSR was under its full control.

On 2 March 1990, the Latvian SSR Supreme Council passed the Law "On Banks" and the decision "On the Bank of Latvia". It determined that the Bank of Latvia, a local central bank, was reestablished as an independent state bank, a money issuing center, a central bank in relation to commercial banks, an organizer of the execution of the state budget, and a monetary policy regulator.

However, only after the Declaration of 4 May 1990 on the restoration of independence of the Republic of Latvia and the collapse of the USSR with the decision of the Republic of Latvia Supreme Council of 3 September 1991 "On the Reorganization of Banking Institutions in the Territory of the Republic of Latvia", the Bank of Latvia became the only central and issuing bank. It took over the ownership and structure of the USSR banks, Latvijas Republikānisko banku, and other state credit institutions.

On 4 March 1992, the Supreme Council of the Republic of Latvia passed the Law "On the Acquisition of the Bank of Latvia established in 1922". The Bank of Latvia's status as the central bank of the country and the issue bank was definitively consolidated by the laws of the Republic of Latvia "On Banks" and "On the Bank of Latvia" adopted on 19 May 1992. For the first time in Latvia, the independence of the national central bank from the government policy was ensured through legislation. The Law "On the Bank of Latvia" did not envisage its commercial activities, therefore, a decision was taken on the restructuring and privatization of 49 Bank of Latvia branches.

Monetary policy strategy and exchange rate policy

Like most central banks of the world, the main goal of the Bank of Latvia is to provide inflation at a certain level.

After joining the European Union (EU), until its membership in the Economic and Monetary Union (EMU), the Bank of Latvia was able to pursue its monetary policy, provided that it is in line with the common EU interests, does not harm the development of other EU Member States, and contributes to economic stability.

Membership in the EU also envisages joining EMU and the euro. After joining the EU, Latvia had to demonstrate its ability to meet the EMU accession criteria. One of these criteria was the two-year membership of the Exchange Rate Mechanism II (ERM II). Latvia joined it on 2 May 2005. ERM II means that at least two years before the euro changeover, the lats had been pegged to the euro and the exchange rate of the lats against the euro may fluctuate by no more than +/− 15% against the lats' pegging rate in euro.

In order to achieve its main goal, as well as successfully entering the EMU, the Bank of Latvia implemented a fixed exchange rate strategy (EUR 1 = Ls 0.702804). [8] Fluctuations around the fixed coupling rate are possible within +/− 1%. The Bank of Latvia had been implementing the lats attraction policy since February 1994, when the lats was pegged to the SDR basket of currencies. The lats was pegged to the euro on 1 January 2005. [9]

Also, at the beginning of 2006 and 2007, the Bank of Latvia operated a refinancing rate instrument, a rate for travel. In a situation where banks do not intend to actively use the instruments offered by the Bank of Latvia, the increase of the refinancing rate has a more signaling function.

Research

The Bank of Latvia also serves as a research center, producing economic and financial analysis and providing data on economic trends and developments in Latvia and the wider region. [10] [11]

Management

The Bank of Latvia is managed by the Bank's Board and Management Board. The council consists of eight people: the president of the bank, his deputy, and six members of the council. The Bank's Supervisory Council is managed by the President of the Bank of Latvia. The Governing Council of the Bank of Latvia takes decisions on behalf of the Bank of Latvia. [12]

For the practical work and operational management of the Bank of Latvia, the Bank Council establishes a permanent board of six people. The Bank's Governor approves the structure of the Bank of Latvia and recruits and dismisses the Bank of Latvia's employees.

Governors

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Latvia</span>

The economy of Latvia is an open economy in Europe and is part of the European Single Market. Latvia is a member of the World Trade Organization (WTO) since 1999, a member of the European Union since 2004, a member of the Eurozone since 2014 and a member of the OECD since 2016. Latvia is ranked the 14th in the world by the Ease of Doing Business Index prepared by the World Bank Group. According to the Human Development Report 2023/24 by the United Nations Development Programme, has a HDI score of a 0.879. Due to its geographical location, transit services are highly developed, along with timber and wood processing, agriculture and food products, and manufacturing of machinery and electronic devices.

<span class="mw-page-title-main">Eurozone</span> Area in which the euro is the official currency

The euro area, commonly called the eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies.

<span class="mw-page-title-main">Latvian lats</span> Former currency of Latvia

The Latvian lats was the currency of Latvia from 1922 until 1940 and from 1993 until it was replaced by the euro on 1 January 2014. A two-week transition period during which the lats was in circulation alongside the euro ended on 14 January 2014. The lats is abbreviated as Ls and was subdivided into 100 santīmi, abbreviated as an s after the santīm amount.

<span class="mw-page-title-main">European Exchange Rate Mechanism</span> European system to reduce exchange rate variability after the Euro

The European Exchange Rate Mechanism (ERM II) is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe.

<span class="mw-page-title-main">Lithuanian litas</span> Former currency of Lithuania

The Lithuanian litas (ISO currency code LTL, symbolized as Lt; plural litai or litų was the currency of Lithuania, until 1 January 2015, when it was replaced by the euro. It was divided into 100 centų. The litas was first introduced on 2 October 1922 after World War I, when Lithuania declared independence, and was reintroduced on 25 June 1993 following a period of currency exchange from the Soviet ruble to the litas with the temporary talonas then in place. The name was modeled after the name of the country. From 1994 to 2002, the litas was pegged to the U.S. dollar at the rate of 4 to 1. The litas was pegged to the euro at the rate of 3.4528 to 1 since 2002. The euro was expected to replace the litas by 1 January 2007, but persistent high inflation and the economic crisis delayed the switch.

<span class="mw-page-title-main">University of Latvia</span> University in Riga, Latvia

University of Latvia is a public research university located in Riga, Latvia. The university was established in 1919.

<span class="mw-page-title-main">SEB banka</span> Latvian subsidiary of Skandinaviska Enskilda Banken

SEB banka is one of the largest banks in Latvia and a part of the Swedish SEB Group. Nowadays, its main rivals in the Latvian banking market are Swedbank, Luminor and Citadele bank.

The Latvian ruble was the name of two currencies of Latvia: the Latvian ruble, in use from 1919 to 1922, and the second Latvian ruble, in use from 1992 to 1993.

<span class="mw-page-title-main">Lithuania and the euro</span> Adoption of the euro by Lithuania

Lithuania, as an EU member state, joined the eurozone by adopting the euro on 1 January 2015. This made it the last of the three Baltic states to adopt the euro, after Estonia (2011) and Latvia (2014). Before then, its currency, the litas, was pegged to the euro at 3.4528 litas to 1 euro.

<span class="mw-page-title-main">Latvia and the euro</span>

Latvia replaced its previous currency, the lats, with the euro on 1 January 2014, after a European Union (EU) assessment in June 2013 asserted that the country had met all convergence criteria necessary for euro adoption. The adoption process began 1 May 2004, when Latvia joined the European Union, entering the EU's Economic and Monetary Union. At the start of 2005, the lats was pegged to the euro at Ls 0.702804 = €1, and Latvia joined the European Exchange Rate Mechanism, four months later on 2 May 2005.

<span class="mw-page-title-main">Bulgaria and the euro</span> Process of Bulgaria adopting the Euro

Bulgaria plans to adopt the euro and become the 21st member state of the eurozone. The Bulgarian lev has been on a currency board since 1997, with a fixed exchange rate initially against the Deutsche Mark and subsequently its replacement the euro. Bulgaria's target date for introduction of the euro was 1 January 2025. However, the 2024 ECB convergence report concluded that Bulgaria did not meet the convergence criteria due to high inflation, so this timeline has been delayed. The Bulgarian National Bank and several Bulgarian politicians have expressed their desire to join as soon as possible, and project that inflation will be low enough by the end of 2024. If Bulgaria adopts the euro, it will become the second national currency of the country after the lev, which was introduced over 140 years ago. The fixed exchange rate is 1.95583 lev for 1 euro.

<span class="mw-page-title-main">Rietumu Banka</span> Latvian private commercial bank

Rietumu Banka is the largest Latvian capital bank and one of the four largest commercial banks operating in the country.

<span class="mw-page-title-main">Sweden and the euro</span> Overview of the relationship between Sweden and the euro

Sweden does not currently use the euro as its currency and has no plans to replace the existing Swedish krona in the near future. Sweden's Treaty of Accession of 1994 made it subject to the Treaty of Maastricht, which obliges states to join the eurozone once they meet the necessary conditions. Sweden maintains that joining the European Exchange Rate Mechanism II, participation in which for at least two years is a requirement for euro adoption, is voluntary, and has chosen to remain outside pending public approval by a referendum, thereby intentionally avoiding the fulfilment of the adoption requirements.

<span class="mw-page-title-main">History of the euro</span> Overview of the history of the euro

The euro came into existence on 1 January 1999, although it had been a goal of the European Union (EU) and its predecessors since the 1960s. After tough negotiations, the Maastricht Treaty entered into force in 1993 with the goal of creating an economic and monetary union (EMU) by 1999 for all EU states except the UK and Denmark.

<span class="mw-page-title-main">Denmark and the euro</span> Overview of the relationship between Denmark and the euro

Denmark uses the krone as its currency and does not use the euro, having negotiated the right to opt out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 53.2% voting no and 46.8% voting yes. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within 2.25% of the euro.

<span class="mw-page-title-main">International status and usage of the euro</span>

The international status and usage of the euro has grown since its launch in 1999. When the euro formally replaced 12 currencies on 1 January 2002, it inherited their use in territories such as Montenegro and replaced minor currencies tied to pre-euro currencies, such as in Monaco. Four small states have been given a formal right to use the euro, and to mint their own coins, but all other usage outside the eurozone has been unofficial. With or without an agreement, these countries, unlike those in the eurozone, do not participate in the European Central Bank or the Eurogroup.

<span class="mw-page-title-main">Economic and Monetary Union of the European Union</span> Economic union and policies

The economic and monetary union (EMU) of the European Union is a group of policies aimed at converging the economies of member states of the European Union at three stages.

Latvijas Krājbanka was a Latvian bank listed on the Riga OMX exchange.

<span class="mw-page-title-main">5 lats coin</span> Latvian coin minted 1929–1932

The 5 lats coin was a Latvian lat coin minted in 1929, 1931 and 1932. It became a popular symbol of independence during the Soviet occupation of Latvia. It was reproduced in several modern commemorative coins of Latvia and is used on the national sides of the Latvian 1 and 2 euro coins. The reverse design was featured on the Ls 500 banknote and in watermarks of all lats banknotes.

<span class="mw-page-title-main">Parex Bank</span> Bank based in Riga, Latvia

Parex Bank was a Latvian bank founded in 1992 by Valērijs Kargins and Viktors Krasovickis as a privately owned full-service banking company in Riga, Latvia that was very dominant in currency exchange in the 1990s. It had local and international clients in both the West and Russia with close ties to the Tambovskaya Russian mafia in St Petersburg and Vladimir Putin.

References

  1. ↑ "History of the Bank of Latvia". Bank of Latvia. Archived from the original on 18 August 2011. Retrieved 16 August 2011.
  2. 1 2 Weidner, Jan (2017). "The Organisation and Structure of Central Banks" (PDF). Katalog der Deutschen Nationalbibliothek.
  3. ↑ "LATVIJAS PSR AUGSTĀKĀS PADOMES LĒMUMS Par Latvijas banku". Archived from the original on 24 June 2021.
  4. 1 2 Investment guide for Latvia. Paris: Organisation for Economic Co-operation and Development. 1998. ISBN   9264160590. OCLC   39287069.
  5. ↑ "National supervisors". ECB Banking Supervision.
  6. ↑ "Law "On the Bank of Latvia" [unofficial translation]". Archived from the original on 28 March 2022. Retrieved 17 May 2018.
  7. ↑ "History of the Bank of Latvia". www.bank.lv. Archived from the original on 9 February 2021. Retrieved 17 May 2018.
  8. ↑ "Zaudējis spēku - Par Latvijas Nacionālo eiro ieviešanas plānu". LIKUMI.LV (in Latvian). Retrieved 17 May 2018.
  9. ↑ "On the Peg Rate of the Lats and the Euro". www.bank.lv. Archived from the original on 16 June 2021. Retrieved 17 May 2018.
  10. ↑ BNN (27 February 2023). "Volume of cashless transactions in Latvia reaches 259.1 billion in 2022". Baltic News Network. Retrieved 4 May 2023.
  11. ↑ LETA (31 March 2023). "Bank of Latvia upgrades GDP growth outlook and downgrades inflation outlook". Baltic News Network. Retrieved 4 May 2023.
  12. ↑ "Council". www.bank.lv. Archived from the original on 16 June 2021. Retrieved 17 May 2018.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.