Published: 06.04.2023

The Council of Latvijas Banka has approved the Annual Report of Latvijas Banka for 2022. In addition to the included financial statements for 2022 and the unqualified independent auditors' opinion, it covers the last year's economic environment and economic development in Latvia and the euro area as well as provides information on the operation of the national central bank and its accomplishments in the areas within its mandate. 

Pursuant to the Law on Latvijas Banka, the financial statements of Latvijas Banka were audited by independent external auditors recommended by the Governing Council of the European Central Bank and approved by the Council of the European Union. Latvijas Banka has received a positive auditors' opinion on its financial statements for 2022 from the auditing company SIA ERNST & YOUNG BALTIC.

Although the conditions in external financial markets and the Eurosystem's monetary policy decisions had adverse effects on Latvijas Banka's financial performance in 2022, previously implemented risk mitigation measures, such as provisioning for financial risks, have enabled Latvijas Banka to reach a neutral financial result in 2022, i.e. with neither loss nor profit.

In 2022:

  • considerable uncertainty prevailed in many areas, and the war waged by Russia in Ukraine heavily affected the global economy;
  • with national economies recovering after the removal of Covid-19 restrictions, as well as supply chain problems amplifying and energy and food prices soaring, inflation reached exceptionally high levels;
  • central banks began raising their base rates rapidly to contain inflation;
  • due to the considerable and sharp increase in interest rates, the market value of government bonds and other securities held by investors, including Latvijas Banka and other national central banks, fell substantially, leading to respective revaluation losses;
  • at the same time, income from the Eurosystem's monetary policy operations also decreased, as the European Central Bank raised both the interest rate on the main refinancing operations (from 0% in early 2022 to 2.5% in late 2022) and the deposit facility rate (from –0.5% in early 2022 to 2% in late 2022) by 250 basis points.

The need to change the monetary policy stance also leads to a significant fall in income incurred by national central banks, and it is expected that the financial performance results of many national central banks will remain low over the coming years.

At the same time, it should be taken into account that the core task of national central banks is to implement monetary policy rather than generate profit, and raising interest rates is the monetary policy response aimed at preventing the high inflation from taking root and securing a lasting return to the 2% inflation target in the euro area over the medium term. Inflation curbing and changes in the monetary policy stance will improve the financial performance of Latvijas Banka and other national central banks, allowing to generate profit and contribute to the government budget in the long term.

In 2022, Latvijas Banka focused on the integration of the Financial and Capital Market Commission, making the preparations required for a successful progress of the process and a smooth start of joint work on 1 January 2023. Last year, the central bank celebrated its centenary by organising several events, including the coin art exhibition "Our Values" held at the Latvian National Museum of Art which was highly appreciated by the public.

Important work has been accomplished in the areas of the central bank's principal activities, including in the field of non-cash and cash payments, in research and financial statistics, participating in the formulation and implementation of the Eurosystem's monetary policy, etc.

In 2022, the number of instant payments processed in Latvijas Banka's instant payment service multiplied by 2.6, reaching 16.2 billion euro owing to the continued development of modern payment infrastructure. Preparatory work for the introduction of the new European interbank payment TARGET system was accomplished, and the system was successfully launched on 20 March 2023.

Particular emphasis was placed on ensuring access to cash in the country, including the extension of the memorandum with the financial sector on preserving the ATM network. Within Latvijas Banka, measures for automation of cash deposits and processing were implemented, as well as the Cashier's Offices were moved to the Riga Branch at Bezdelīgu iela 3.

We, as an institution, are commencing the year 2023 at a challenging time – more needs to be done not only at home but also on the international stage. One of our priorities is to ensure the breakthrough needed for the Latvian economy to grow. We intend to work in a number of areas: disentangle the knot of lending problems, set and implement ambitious objectives in the field of capital market development, design modern services and develop state-of-the-art possibilities helping the Latvian economy to operate more successfully," emphasises Mārtiņš Kazāks, Governor of Latvijas Banka.

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