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History of the Bank of Latvia

Republic of Latvia was proclaimed on November 18, 1918. Next steps that the new state took were  to create the financial system and introduce the national currency of Latvia.

In order to ensure the implementation of monetary policy, the Constitutional Assembly adopted the law founding the Bank of Latvia on September 7, 1922. The right to issue the national currency was vested with the Bank of Latvia. The provisional Charter of the Bank was passed on September 19, 1922 with a resolution of the Cabinet of Ministers. Initial capital of the Bank of Latvia totalled 10 million lats.

The Bank of Latvia was created out of the State Savings and Credit Bank, whose assets and liabilities were taken over by the Bank of Latvia on November 1, 1922. It was on the next day, November 2, that the Bank of Latvia issued provisional banknotes of 10-lats denomination - 500-ruble notes with an overprint. The Bank of Latvia comprised both the functions of a central bank (currency issuance, control of currency backing and currency circulation) and a commercial bank (lending to and financing of public and private enterprises, institutions, and individuals).

The Charter of the Bank of Latvia was adopted at the plenary meeting of the Saeima (the Parliament) on April 24, 1923, and was approved by President Janis Cakste on July 2, 1923. The Bank was administered and managed by the Board of Governors and the Executive Board. The Board of Governors consisted of the Chairman, the Deputy Chairman and eleven members of the Board of Governors, whereas the Executive Board was comprised of the Director in Chief, the Deputy Director in Chief, and three Directors.

Ringolds Kalnings, Minister of Finance, became the first Chairman of the Board of Governors. In 1926 Julijs Celms, an economist, Member of the Saeima, and Director of the Riga Discount Bank, became Chairman of the Board of Governors, but in 1931 this position was occupied by Adolfs Klive, who remained the Chairman of the Board of Governors until 1940, when Soviet troops advanced into Latvia.

The Bank's structure was elaborated as follows in 1924: a Head Office (K. Valdemara iela 2A, Riga), eight branches conducting all banking operations, and fourteen branches functioning as the State Treasury and accepting deposits. This was the structure of the Bank until 1940.

The central building of the Bank was designed by the well-known Latvian architect Augusts Reinbergs (1860-1908). The construction and building of the Bank premises began in 1902, executed by the enterprise of P. Radzins, and was completed by January 1905 when operations began. The building is outstanding for the period, remarkable both in design and construction. Operation halls are constructed in reinforced concrete. There is no flamboyance either in structure or embellishments on the building’s exterior. Its detailed accuracy and refined line give the building a simple and impressive dignity. The facade has a Renaissance, Florentine design. The metal eagles above the entrance symbolize wealth and have become a greeting card for the building. The Bank of Latvia building is listed among most salient masterworks of architecture in the Republic of Latvia. It is one of the last eclectic buildings in Riga.

On June 17, 1940 Latvia was occupied by the Red Army, and on August 5 annexed to the USSR. The law nationalizing banks and large industrial enterprises was adopted on July 25, 1940. The nationalized credit institutions were merged and reorganized into branches of the Bank of Latvia. The management of the Bank of Latvia was dismissed on July 13. Peteris Ozols was appointed Chairman of the Board of Governors of the Bank by the Cabinet of Ministers. The law on dismissal of the Boards of Governors of all banks, including the Bank of Latvia, was adopted on August 3. This law transferred the duties (functions) of Boards of Governors to Executive Boards. The Cabinet of Ministers appointed Karlis Zandersons to the position of Director of the Bank of Latvia (Chairman of the Executive Board), and it also appointed Members of the former Board of Governors and Executive Board Karlis Vanags, Ernests Ozolins and Janis Stalbovs to the positions of Director. This Bank's management functioned until October 10, 1940, when the Bank of Latvia was legally liquidated. With the date of liquidation, the functions of the Bank of Latvia were taken over by the Latvia Republican Office of the State Bank of the USSR, one of the constituent parts of the centralized Soviet banking system. The first Governor of the Bank was G. Teplovs, Authorized Representative of the State Bank of the USSR in Latvia, but his Deputy was K. Zandersons. The Soviet monetary system was gradually introduced in Latvia. Without prior notice, the lats was withdrawn from circulation on March 25, 1941.

At the beginning of the Second World War, the Bank of Latvia and its branches suffered severe losses in staff and material assets. Many Bank employees were victimized in the deportations that took place in 1941. The withdrawal of the Red Army also brought a time of tribulation. Precious metals and articles thereof, money and other valuables were removed from Latvia and sent to the USSR.

In June 1941, Latvia was occupied by German troops. Right after the invasion of the German army, the Bank of Latvia resumed its activity; however, the Bank did not regain its right to issue currency.

During German occupation, the functions of the central bank were performed by the Riga State Credit Union. A monetary policy tailored especially for occupied countries was implemented, the aim of which was to suppress and rob said countries.

After the Second World War, Latvia again was incorporated into the Soviet financial system. The State Bank of the USSR both issued money and functioned as the State Treasury. The monetary system of the Latvian Soviet Socialist Republic was entirely controlled by the Bank.

In the middle of 1980s, the political and economical restructuring taking place in the USSR also triggered changes in Latvia, where the reorganization of the banking system began in 1988. In 1987, the Latvia Republican Office of the State Bank of the USSR was renamed the Latvia Republican Bank of the State Bank of the USSR; however, it did not become a central bank with the right to issue the national currency.

On March 2, 1990, the Supreme Council of the Latvian SSR adopted the Law "On Banks" and the Resolution "On the Bank of Latvia". It stipulated that the Bank of Latvia, a local central bank, was established (actually restored) in the Latvian SSR. This was a full-fledged central bank - an independent state bank which had the exclusive right to issue the national currency, supervise commercial banks, organize fulfilment of the state budget treasury position, and control the economy by means of monetary policy instruments. However, it was only after the declaration of independence of the Republic of Latvia on May 4, 1990 and the collapse of the USSR that, in accordance with the Resolution of the Supreme Council of the Republic of Latvia "On Reorganization of Banks in the Territory of the Republic of Latvia," passed on September 3, 1991, the Bank of Latvia became a central bank with the right to issue the national currency. The Bank of Latvia took over and incorporated into its structure the Latvia Republican Bank of the State Bank of the USSR and other state credit institutions. Einars Repse, Chairman of the Banking and Finance Subcommittee of the Economic Committee at the Supreme Council of the Republic of Latvia, was appointed Governor of the Bank of Latvia. On March 4, 1992, the Supreme Council adopted the Law "On Taking over Rights of the Bank of Latvia Founded in 1922". The status of the Bank of Latvia as a central bank with the right to issue the national currency was reinforced by two Republic of Latvia Laws, "On Banks" and "On the Bank of Latvia" passed on May 19, 1992. For the first time, the independence of the central bank from the Government's policy was ensured by legislation. The Law "On the Bank of Latvia" did not stipulate that the Bank of Latvia had the right to conduct commercial operations. Therefore, the resolution to restructure and privatize forty-nine branches of the Bank of Latvia was adopted.

On July 31, 1990, the Supreme Council of the Republic of Latvia passed the Resolution "On the Program to Create the Republic of Latvia Monetary System". The restoration of the Latvian national currency was prepared by the Čouncil of the Bank of Latvia in collaboration with advisors from Latvia and abroad. The Monetary Reform Committee of the Republic of Latvia was established, and on May 4, 1992, it passed a resolution introducing a temporary currency - the Latvian ruble. The national currency - the lats - was introduced in 1993. This successful reform, ending in the introduction of the lats, helped to promote the transition to a market economy.

On December 20, 2001 Mr. Ilmars Rimsevics was appointed Governor of the Bank of Latvia.

According to the Law "On the Bank of Latvia", the Bank of Latvia is administered by a Council and a Board. The Council consists of eight persons: the Governor, the Deputy Governor and six members of the Council. The Council is chaired by the Governor. The Council of the Bank of Latvia makes decisions on behalf of the Bank of Latvia. The Board, which is established by the Council and consists of six persons, executes the practical work and ensures the efficient management of the Bank of Latvia. The Governor of the Bank of Latvia approves the Bank of Latvia's structure, and has the power to hire and dismiss Bank of Latvia employees.