The Bank of Latvia is the central bank of the Republic of Latvia. It is one of the key public institutions and carries out economic functions as prescribed by law.
The principal objective of the Bank of Latvia is to regulate currency in circulation by implementing monetary policy to maintain price stability in Latvia. Through its activities the Bank of Latvia encourages free competition, efficient allocation and flow of resources, stability, co-ordination and supervision of the financial system.
The Bank of Latvia’s functions are set out in the Republic of Latvia Law ‘On the Bank of Latvia’. Among the most important objectives of the national central bank are the following:
The Bank of Latvia represents the Republic of Latvia in foreign central banks and international currency institutions. The Bank of Latvia also consults the Parliament and the Cabinet of Ministers on monetary and banking policy issues.
In execution its functions the Bank of Latvia is guided by the Law ‘On the Bank of Latvia’ and is not subject to decisions and instructions by the Government or its agencies. The Bank of Latvia is independent in setting and implementing policy under its legal mandate.
Supervision of the Bank of Latvia is vested with the Parliament.
The Law ‘On the Bank of Latvia’ proscribes the national central bank from conducting any entrepreneurial activity. The Bank of Latvia finances its activities from revenue received through foreign exchange and credit operations that are carried out within the framework of its objectives.
The Law ‘On the Bank of Latvia’ prescribes the authorised nominal capital of the Bank of Latvia at 25 million lats.
The nominal capital is comprised of the State allotted resources and the Bank of Latvia’s profit allocations.
Pursuant to the Amendments of June 20, 2002 to the Law ‘On the Bank of Latvia’, the Bank of Latvia transferred other reserves to the nominal capital, increasing it by 14 900 thousand lats to reach the amount specified in the Law ‘On the Bank of Latvia’, and the remaining part of other reserves in the amount of 23 324 thousand lats was transferred to the reserve capital.
The Law ‘On the Bank of Latvia’ establishes that part of the Bank of Latvia’s annual profit, calculated by applying the tax rate set for residents by the Law ‘On Enterprise Income Tax’, and a payment in the amount of 15 per cent of the profit earned during the reporting year for the usage of State capital shall be transferred to the State budget. On December 31, 2002, the enterprise income tax rate applicable to residents of the Republic of Latvia was 22 per cent. Hence, 37 per cent of the Bank of Latvia’s profit earned during the year ended December 31, 2002 shall be transferred to the State budget.
The Bank of Latvia’s profit remaining after making the above deductions shall be transferred to the reserve capital. The reserve capital shall be formed to cover possible losses.
Source: Bank of Latvia