The Bank of Latvia

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Bank of Latvia

Pursuant to the Law "On the Bank of Latvia", it is the duty of the Bank of Latvia to organise and ensure the functioning of the interbank payment and settlement systems in Latvia.

One of the key tasks of the central bank is to establish and maintain a secure and effective payment system in Latvia. The system plays an important role in the development of the country's financial sector, ensuring non-cash settlement between banks. Only through an effective payment system can the central bank perform its main task - implementation of monetary policy. The two key elements of the payment system are financial institutions and the system's infrastructure (its technical and administrative management). The Bank of Latvia organises and maintains this infrastructure, regulates its operations, analyses and forecasts possible developments to ensure that it functions as efficiently as possible.

Currently there are two systems in operation at the Bank of Latvia and both are used for inter-bank settlement in lats.

The Electronic Clearing System (EKS) is the net settlement system of the Bank of Latvia that was launched on 17 November 1998, replacing the previous paper-based clearing system, and is used for handling retail payments. The EKS can be regarded as an ACH (automated clearing house) system where payment handling is fully automated and only electronic documents are accepted and processed.
The EKS is the largest retail payment handling system in Latvia that ensures fast, efficient and low-cost settlements in lats and euro. The EKS commenced the handling of retail payments in euro in January 2008, giving the free choice opportunity for banks to abandon the euro payment services offered by correspondent banks for euro payments, where the path of each payment is time-consuming and involves additional costs. The EKS euro gives an opportunity to settle customer payments in euro among banks in Latvia within one business day - similar to payments currently settled in lats. 

A real time gross settlement system (SAMS) was launched on September 8, 2000. SAMS is designed for large volume, urgent payments related to inter-bank market transactions, open market and other Bank of Latvia monetary policy operations. The system enhances risk control and is an effective tool for the implementation of monetary policy. It has a positive impact on economic activities both in domestic and foreign markets.

The Bank of Latvia interbank payment systems are fully automated and harmonised with EU requirements.

In November 2007, the interbank euro payment system TARGET2-Latvija, one of the 21 components in Trans-European Automated Real-time Gross settlement Express Transfer System TARGET2, started its operation. The operation of TARGET2-Latvija is ensured by the Bank of Latvia in conjunction with other authorized banks of the European System of Central Banks.

In October 2007, the Eurosystem also launched the SEPA (Single Euro Payments Area) project for the non-euro area countries, including Latvia. The single currency and a single set of payment instruments comprise the single euro payments area. The Bank of Latvia, similar to the other NCBs of the respective EU countries, is one of the driving forces behind the project in Latvia. To ensure efficient SEPA introduction in Latvia, on 28 October 2008 the National SEPA Working Group, representing all project's stakeholders, was established within the Euro project.