Bank of Latvia
 Logo of the Bank of Latvia | |
| Company type | Central bank |
|---|---|
| Industry | Banking, Financial services |
| Founded | September 7, 1922 in Riga, Latvia |
| Headquarters | Riga , Latvia |
Key people | Mārtiņš Kazāks (Governor) |
| Products | Currency issuance, Monetary policy, Banking supervision |
| Website | www |
The Bank of Latvia () acts as the national central bank of Latvia within the framework of the Eurosystem. It functioned as Latvia’s central banking institution from 1922 until 2013, with an interruption spanning from 1940 to 1992. Throughout its history, it issued the Latvian lats between 1922 and 1940, followed by the Latvian ruble from 1992 to 1993, and subsequently the second series of the lats from 1993 until 2013. Since 2014, it has operated as Latvia’s national authority responsible for European Banking Supervision. The Bank of Latvia is headquartered in Riga.
History
The Bank of Latvia was established when the Constitutional Assembly enacted the Law on the Establishment of the Bank of Latvia on 7 September 1922, which granted it exclusive rights to issue currency. Provisional regulations for the Bank were approved on 19 September 1922, with an initial capital stock set at 10 million lats. On 23 April 1923, the Saeima ratified a permanent Statute, which was signed into law by President Jānis Čakste on 2 July. The governance structure consisted of a council—comprising a chairman, deputy chairman, and eleven members—and a board made up of a director general, deputy director, and three directors. Beyond its monetary functions, the Bank also played a developmental role by providing short-term credit to sectors such as industry and agriculture.
Following Latvia's occupation on 17 June 1940 and its subsequent incorporation into the USSR on 5 August, legislation titled the Law on Nationalization of Banks and Large Industrial Enterprises was enacted on 25 July. After World War II, issuance of currency and treasury responsibilities were transferred to the USSR State Bank, which exercised comprehensive control over the monetary system within the Latvian SSR.
On 2 March 1990, the Latvian SSR Supreme Council passed laws reinstating the Bank of Latvia as an autonomous state bank, serving as the central bank for commercial banks, organizer of the state budget, and regulator of monetary policy. Following Latvia’s May 1990 Declaration of Independence and the dissolution of the USSR, on 3 September 1991, the Supreme Council designated the Bank as Latvia’s exclusive central and issuing bank. This transition involved taking over ownership and organizational structures from former USSR banks and other state financial institutions.
Legislation enacted on 4 March 1992 reaffirmed the Bank of Latvia’s role as both central bank and issuing authority. Further laws passed on 19 May 1992 established its independence from governmental influence for the first time. As commercial banking activities were removed from its remit, a decision was made to restructure and privatize its network of forty-nine branches.
Monetary policy strategy and exchange rate policy
The principal objective of the Bank of Latvia, consistent with most central banks, is to maintain inflation within a targeted range.
Upon joining the EU, the Bank aligned its monetary policy with EU frameworks to support economic stability and shared EU interests. EU accession paved the way for Latvia’s participation in the EMU and adoption of the euro currency. To fulfill EMU entry requirements, Latvia needed to spend two years in the ERM II, which it joined on 2 May 2005. Participation in ERM II mandated that the lats be pegged to the euro with exchange rate fluctuations restricted to ±15%.
To meet these criteria and facilitate EMU integration, the Bank adopted a fixed exchange rate regime (EUR 1 = Ls 0.702804), permitting only ±1% variation. Since February 1994, initially, the lats was anchored to a basket of currencies (SDR), before transitioning to a direct euro peg starting from 1 January 2005.
In early 2006 and again in early 2007, refinancing rate tools were primarily employed by the Bank as signals to financial institutions due to limited demand for these instruments by banks at those times.
Research
The Bank of Latvia serves as a hub for research, offering in-depth economic and financial evaluations along with comprehensive information regarding Latvia's economic patterns and regional progress.
Management
The institution is directed by two main bodies: the Bank's Board and the Management Board. The council consists of eight individuals, including the president of the bank, their deputy, and six additional council members. The President of the Bank of Latvia leads the Supervisory Council, while decision-making authority rests with the Governing Council on behalf of the bank.
For day-to-day administration, a permanent board composed of six members is appointed by the Bank Council. The Governor is responsible for overseeing the organizational framework and holds authority over hiring and termination of staff.
Governors
- Kārlis Vanags (1 November 1922 – 14 October 1923)
- Edgars Švēde (15 October 1923 – 21 September 1926)
- Kārlis Vanags (22 September 1926 – 13 July 1940)
- Kārlis Zandersons (13 July 1940 – 21 July 1940)
- Artūrs Graudiņš (26 March – 30 July 1990)
- Pāvils Sakss (31 July 1990 – 3 September 1991)
- Einars Repše (3 September 1991 – 20 December 2001)
- Ilmārs Rimšēvičs (21 December 2001 – 20 December 2019)
- Mārtiņš Kazāks (21 December 2019 – present)
See also
External links
- Official website of Latvijas Banka (Latvian)
- Official website of Latvijas Banka (English)