The Bank of Latvia (Latvian: Latvijas Banka) is the central bank of Latvia. It is one of the main public institutions of the state and performs economic functions as defined by law. It was established in 1922.

The main objective of the Bank of Latvia is to regulate the currency in circulation by implementing monetary policy in order to maintain price stability in Latvia. Until December 31, 2013, the bank was responsible for issuing the former Latvian currency, the lat. The administration of the Bank of Latvia is located in Riga. The financial year of the bank starts on January 1 and ends on December 31.

History

On September 7, 1922, the Constitutional Assembly adopted the Law on the Establishment of the Bank of Latvia. The Bank of Latvia was granted the right to discharge. On September 19, 1922, by decision of the Cabinet, the provisional statute of the Bank was approved with its initial capital of 10 million lats. On April 24, 1923, Saeima approved the statute of the Bank of Latvia, signed by President Jānis Šakste on July 2. The bank is headed by a board of directors and a board of directors. The board consists of a chairperson, a deputy and 11 members, but the board includes a director general, his deputy and three directors.

On June 17, 1940, Latvia was occupied and incorporated into the Soviet Union, on August 5. On July 25, the Law on the Nationalization of Banks and Large Industrial Enterprises was passed. After World War II, the functions of monetary discharge and the Ministry of Finance were performed by the State Bank of the Soviet Union, but the monetary system of the Latvian SSR was completely under its control.

On March 2, 1990, the Supreme Council of the Latvian SSR adopted the "Banking Law" and the "Bank of Latvia" decision. It determined that the Bank of Latvia, a local central bank, was rebuilt as an independent national bank, a currency issuance center, a central bank related to commercial banks, a convenor for the execution of the state budget, and a monetary policy supervisory authority.

However, only with the May 4, 1990 declaration on the restoration of the independence of the Republic of Latvia and the dissolution of the Soviet Union, the decision of the Supreme Council of the Republic of Latvia of September 3, 1991 "On the reorganization of banking institutions in the territory of the Republic of Latvia", the Bank of Latvia became the sole central bank. It took over the ownership and structure of the Soviet Bank, the Bank of Latvia, and other state credit institutions.

On March 4, 1992, the Supreme Council of the Republic of Latvia adopted the Law "On the Acquisition of the Bank of Latvia established in 1922". The status of the Bank of Latvia as the national central bank and issuing bank was finally consolidated by the Laws of the Republic of Latvia "On Banks" and "On the Bank of Latvia" adopted on May 19, 1992. In Latvia, the independence of the National Central Bank from government policy was ensured for the first time through legislation. The Law "On the Bank of Latvia" did not envisage its commercial work, therefore, a decision was taken on the restructuring and privatization of the Bank of Latvia's 49 branches.

Monetary Policy Strategy and Exchange Rate Policy

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

Joining the European Union until it becomes a member of the European Union Economic and Monetary Union (EMU), the Bank of Latvia is able to pursue its monetary policy provided that it is in the common interest of the European Union, does not harm the development of other European Union member states and contributes to economic stability.

European Union member states also envision joining the European Monetary Union and the Euro. After joining the European Union, Latvia must demonstrate its ability to meet the criteria for joining the European Monetary Union. One of these criteria is two-year membership in the European Exchange Rate Mechanism (ERM II). Latvia joined the working group on May 2, 2005. ERM II means that the Lat has been pegged to the euro for at least two years prior to the euro conversion, and the exchange rate of the Lat against the euro may fluctuate by no more than +/- 15% relative to the Lat's euro-pegged exchange rate.

In order to achieve its main objectives and to successfully enter the European Monetary Union, the Bank of Latvia has implemented a fixed exchange rate strategy (1 euro = 0.702804 Lat). The volatility of the fixed coupling rate can be within +/- 1%. The Bank of Latvia has been implementing the lat attraction policy since February 1994, when the lat was pegged to the SDR basket of currencies. The lat was pegged to the euro on January 1, 2005.

In addition, in 2006 and early 2007, the Bank of Latvia implemented a refinancing rate instrument, the travel rate. The increase in the refinancing rate has more signaling functions in cases where the bank does not intend to actively use the instruments provided by the Bank of Latvia.

Management

The Bank of Latvia is governed by the Bank's Board of Directors and Management Committee. The Board of Governors consists of eight persons: the President of the Bank, his deputies and six members of the Board of Governors. The Supervisory Board of the Bank of Latvia is managed by the Governor of the Bank of Latvia. The Board of Governors of the Bank of Latvia makes decisions on behalf of the Bank of Latvia.

For the practical work and operational management of the Bank of Latvia, the Board of Governors of the Bank has established a permanent Board of Directors composed of six persons. The Governor of the Bank approves the structure of the Bank of Latvia and recruits and dismisses employees of the Bank of Latvia.

Presidents of previous years

• Kārlis Vanags (November 1, 1922 - October 14, 1923)
• Edgars Švıde (October 15, 923 - September 21, 1926)
• Kārlis Vanags (September 22, 1926 - July 13, 1940)
• Kārlis Zandersons (July 13, 940 - July 21, 1940)
• Artêrs Graudižš (? March 26 - 30 July 1990)
• Pāvils Sakss (July 31, 1990 - September 3, 1991)
• Einars Repše (September 3, 1991 - December 20, 2001)
• Ilmārs Rimšıvičs (December 21, 2001 - December 20, 2019)
• MārtižšKazāks (December 21, 2019 - present)