As a member of the Eurosystem, Latvijas Banka, in its relations with counterparties (credit institutions registered in the Republic of Latvia or branches registered in the Republic of Latvia of credit institutions registered abroad) implements the monetary policy of the ECB. Being an active monetary policy maker, Latvijas Banka plays an important two-part role. On the one hand, it represents the Latvian stance and brings it to the Eurosystem, while, on the other hand, it explains the impact the single monetary policy exerts on the Latvian economy and the euro area economy in general.
With Latvia joining the euro area, the Governor of Latvijas Banka becomes a full-fledged member of the ECB Governing Council. The ECB Governing Council acts on the basis of the principle "one member, one vote"; hence each of its members exercises equal rights to influence the decision-making process.
Latvijas Banka issues financing to its counterparties against collateral. In order to ensure a smooth flow of payments, the counterparties are provided access to intraday credit and longer term loans via monetary policy operations. Like central banks of other countries, Latvijas Banka accepts as collateral such eligible assets as domestic and foreign securities and credit institution loans (credit claims) to euro area non-financial corporations and public sector institutions. Information about eligible credit claims is not published, while national central banks maintain internal registers on credit claims used by counterparties as collateral.
Under the Eurosystem refinancing operations, Latvijas Banka provides liquidity to eligible counterparties against eligible collateral at interest rates either set by the ECB, or the ECB interest rate is the minimum bid rate. Latvijas Banka offers two standing facilities to credit institutions: they can obtain overnight liquidity, at their own initiative, from the national central bank against sufficient and eligible collateral, or make an overnight deposit with the central bank. Moreover, all credit institutions operating in the Republic of Latvia are obliged to keep their minimum reserves on accounts with Latvijas Banka. These funds are used to counteract temporary liquidity fluctuations and to execute interbank payments.
The specialists of Latvijas Banka compile information and make assessments regarding the economic development and economic policy in the euro area, including Latvia; they likewise develop forecasts of major economic indicators. The forecasts are prepared both independently and in liaison with the ECB specialists and national central banks of other Member States. Latvijas Banka develops and improves the instruments used in forecasting and economic analysis on an ongoing basis.
Latvijas Banka disseminates its stances and assessment regarding the economic developments in Latvia and across the world by updating, on a regular basis, i.e. at least twice a year, the key macroeconomic projections for the Latvian economy. The projections and the rationale behind them are included in Latvijas Banka publication Macroeconomic Developments Report published twice a year.
A list of marketable assets eligible for use as collateral in Eurosystem monetary policy operations
ECB eligibility assessment procedure for assets used as collateral