Published: 27.04.2018

The Council of Latvijas Banka has approved the Annual Report of Latvijas Banka for 2017. Apart from the financial statements and  positive independent auditors' report, it provides an overview of the economic environment and economic development in Latvia and the euro area as well as information on the operation of the national central bank and the accomplishments in the areas of its responsibility: participation in the formulation and implementation of the Eurosystem's monetary policy; economic analysis and research; management of foreign reserves and other financial investments; ensuring cash circulation; maintaining the interbank payment systems' infrastructure; compilation and publishing of statistics; maintaining the Credit Register, etc.

The global economic growth accelerated in 2017. Moreover, most global economies saw the pace of economic growth increase. It was access to finance guaranteed by the central bank accommodative monetary policy as well as the recovery in global trade that supported growth.

The year 2017 was particularly beneficial for the euro area and Latvia. The increase in gross domestic product (GDP) reached 2.5%, marking the strongest growth over the past ten years, but Latvia's GDP moved up 5.0% which was the highest growth rate seen in the last six years.

The accommodative monetary policy implemented by the Eurosystem played a significant role in supporting growth. Confidence that inflation is approaching its target level over the medium term, i.e. the price rise that is below but close to 2%, has increased, but uncertainty still remains. At the same time, it is important to emphasise that during a period of more dynamic growth and low interest rates an economic policy geared towards boosting the economic potential needs to be implemented to ensure balanced economic growth in the long term. Building up reserves and savings during the above period is essential, taking into account in particular the fact that the period of low interest rates will come to an end some day.

Latvijas Banka implemented large projects in 2017. Latvia was the first euro area country to introduce instant payments, i.e. interbank payments executed within a few seconds 24/7/365. Execution of cash transfers between various credit institutions taking days, hours, even minutes on business days and business hours only will soon become a chapter of history closed for good.

Two significant projects were implemented in the securities market in cooperation with other financial market participants. Latvia joined the TARGET2-Securities platform created by the Eurosystem. It enables the provision of harmonised and standardised securities and cash settlement services to the European central securities depositories and their customers in an integrated technical environment in the delivery versus payment mode. Latvijas Banka provided considerable support to ensure that it is Latvia where Nasdaq CSD SE, the central securities depository of the Baltic States, successfully launches its operation. Nasdaq CSD SE comprises the securities markets of all the Baltic States and has been assessed as fully compliant with the Eurosystem's monetary policy framework.

Considerable work has been accomplished in the field of cash processing. The Baltic Regional Cash Processing Centre operating at Latvijas Banka processed approximately 140 million banknotes and 40 million coins in 2017.

Taking account of the interests of households and businesses, work continued towards reducing the duration of the currency verification process at the State Single Currency Monitoring Centre established by Latvijas Banka and operating since 1 July 2016. Previously, the examination of suspected banknotes and coins could last up to one and a half months in the country. As a result of the introduction of centralised examination of banknotes and coins at Latvijas Banka, the average verification time-frame was reduced to one week.

One of the most significant initiatives in 2017 was Latvijas Banka's participation in the drafting of proposals for improving the state-funded pension scheme. Changes to the pension funds' legal framework were made taking account of the interests of managers and investors. Consequently, smaller annual fees for pension funds' management allowed saving at least 20 million euro, with each participant of the second pillar of the pension scheme saving approximately 16 euro.

Latvijas Banka's profit earned in 2017 was 23.9 million euro. Pursuant to the Law on Latvijas Banka, 65% or 15.5 million euro of Latvijas Banka's profit for 2017 has been appropriated to the central government budget; the rest of the profit has been transferred to the reserve capital of Latvijas Banka. Over the past five years, the aggregate profit of Latvijas Banka reached 161.5 million euro, including its contribution to the central government budget totalling 104.9 million euro.

The Annual Report of Latvijas Banka for 2017 is available at www.bank.lv. The financial statements of Latvijas Banka for 2017 along with the independent auditors' report are also published separately on the website of Latvijas Banka.

Latvijas Banka is the central bank of Latvia an independent institution and a member of the Eurosystem. The primary objective of Latvijas Banka is the same as that of the central banks of other euro area countries and the European Central Bank: price stability (inflation rates below, but close to, 2% over the medium term). This is an essential precondition for a strong and growth-oriented economy. To achieve that, Latvijas Banka participates in the formulation and implementation of the Eurosystem's monetary policy.

Latvijas Banka promotes analysis and research of macroeconomic and financial issues, thereby laying a secure foundation for professional activities in these areas. The role of an industry expert helps Latvijas Banka raise public awareness of the development of the economy and the monetary system, the current situation and the economic policy being pursued. Latvijas Banka takes an active part in educating the general public on various economic topics.

Latvijas Banka, acting in the public and economic interest, carries out several tasks significant for each and every inhabitant, financial markets and the public at large:
participates in the formulation and implementation of the euro area's monetary policy;
issues cash in Latvia and participates in ensuring the cash circulation process in the euro area;
discharges the function of the central national currency authentication centre;
maintains the interbank payment systems' infrastructure (including the infrastructure for instant payments);
manages the foreign reserves and other financial investments;
acts as the financial agent of Latvia's government and provides financial services to other market participants;
compiles and publishes financial, monetary statistics and balance of payments statistics;
maintains and develops the Credit Register;
acts as an advisor to the Parliament and Cabinet of Ministers of the Republic of Latvia on monetary policy issues and other issues related to Latvijas Banka's operation.