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On the Resolutions of the Bank of Latvia Council
Riga 16 July 2009
The Bank of Latvia Council resolved today not to change the interest rates set by the Bank of Latvia or the reserve requirement.
Both lending and deposit interest rates set by the central
bank are at a low level following the decisions adopted in March - May
and are essential for activity in the interbank lats money market and
for motivating the banks to direct their available resources to lending
to the economy.
Although the first signs of possible economic stabilization
have appeared over recent months, currently a high level of uncertainty
regarding the state budget acts as an obstacle to both activity in the
real economy and financial markets. This uncertainty dampens the banks'
desire to lend, the enterprises' desire to invest, and the consumers'
desire to spend as well as the willingness of foreign investors and
enterpreneurs to do business with Latvia. Only a small step forward has
been made in terms of setting the state budget matters in order, but it
is its success and a clear vision in dealing with fiscal matters that
will be of utmost importance in setting the stage for economic
development in the near future.
The interest rates set by the Bank of Latvia are as follows:
|
|
In effect as of |
% per annum |
|
Bank of Latvia refinancing rate |
24.05.2009. |
4.000 |
|
Bank of Latvia marginal lending facility rate to banks that have used the facility no more than 5 working days within the previous 30 day period |
09.12.2008. |
7.500 |
|
Bank of Latvia marginal lending facility rate to banks that have used the facility no more than 6-10 working days within the previous 30 day period |
09.12.2008. |
15.000 |
|
Bank of Latvia marginal lending facility rate to banks that have used the facility more than 10 working days within the previous 30 day period |
09.12.2008. |
30.000 |
|
Marginal deposit facility rate with the Bank of Latvia |
24.03.2009. |
1.000 |
The Bank of Latvia Council made amendments to
the "Regulation for Calculating and Fulfilling the Minimum Reserve
Requirements for Banks" (amendments will take effect on
24 October), increasing the fines for non-compliance with the
requirements. The fine is calculated taking as base the lowest of the
marginal lending facility rates and then, depending of the frequency of
non-compliance, adding to it 10 or 15 percentage points (currently, 2.5
or 5) Under a fixed exchange rate, the minimum reserve requirements are
an important monetary policy instrument and increasing the fine will
reduce the non-compliance risk.
The Bank of Latvia Council approved a new
edition of the "Regulation for Compiling of the Monthly Financial
Position Report of Monetary Financial Institutions" (to
take effect on 1 May 2010). The changes will affect both the frequency
of information to be provided by certain groups of Monetary Financial
Institutions (MFI) and the structure of information, thereby optimising
the information-providing load on respondents.
From now on savings-and-loan associations will prepare and
provide their statements once every quarter and the electronic money
institutions once every six months. Thus the MFIs will no longer have
to provide information on types of loans and debt securities, which the
Bank of Latvia can access from the Credit Register and Securities
database. For the purposes of a more complete monetary and economic
analysis, however, new categories for MFI-extended loans and borrowers
have been set up; the breakdown by currency has been amended among
other changes.
The changes in the regulations that will take place after 1
May 2010 will not disrupt the time lines of the MFI balance sheet
statistics published by the Bank of Latvia (see http://www.bank.lv/lat/main/all/statistika/banku-stat/dati20064/),
and they will be supplemented with the new information provided by
MFIs.
The Bank of Latvia Council adopted new "Regulation for Compiling Reports on Foreign Currency Purchases and Sales" (to take effect on 1 January 2010), thereby renovating, in terms of both content and form, the former regulation adopted in 1997. The foreign currency market is an active part of the financial market and the data included in the renovated statements will let them to be of better use for analyzing the market for various purposes both in Latvia and elsewhere. The most substantial changes in the Regulation involve entering a transaction by date of transaction instead of settlement and expanding the data related to both lats and other currency cash and non-cash transactions.
The above Regulations will be available to all interested parties in the Legal section of the Bank of Latvia's Internet home page www.bank.lv.
