Published: 05.04.2022

The Council of Latvijas Banka has approved the Annual Report of Latvijas Banka for 2021. In addition to the financial statements and the unqualified independent auditors' opinion, it provides an overview of the last year's economic environment and developments in Latvia and the euro area as well as gives an insight into the operation of the national central bank and its accomplishments in the areas within its mandate.

Mārtiņš Kazāks, Governor of Latvijas Banka, stresses in the Foreword to the Report that Latvijas Banka has managed to accomplish a number of lasting and remarkable things as well as to commence the implementation of a series of new tasks aimed at strengthening the financial sector in the future. Among other things, a new and modernised Law on Latvijas Banka has been adopted by the Saeima of the Republic of Latvia. It sets a framework for the operation of the central bank and the financial market supervisor – the Financial and Capital Market Commission (FCMC) – as a single institution from 1 January 2023. The preliminary steps towards the merger of Latvijas Banka and the FCMC were already taken in 2021.

The central bank's management model experienced substantial changes last year, i.e. the central bank's Board was dissolved and the transition to a single-tier top level management took place. Thus, the current policy of ensuring an efficient and high-performance operation of the central bank through doing more and better, using the same or less resources has been continued.

Latvijas Banka has carried out significant work in its business areas, for example, the development of the instant payment infrastructure has been continued via the introduction of modern and innovative technological solutions and attracting new financial markets, including public players (the Treasury) at the beginning of 2022.

As regards cash, an important historical agreement on preserving access to cash was reached with the financial sector, thus contributing to public security. Latvijas Banka will also continue to pay close attention to this issue in the coming years, ensuring freedom of choice for the public when making payments. The introduction of a new type of money – the digital euro – in a foreseeable future will facilitate the above freedom of choice. Active work is underway on this euro area project that involves also representatives of the Latvian financial technology sector.

"Sustainability issues play an increasingly important role in the context of today's agenda. The monetary policy strategy review will help enhance this role at euro area level by incorporating climate change considerations in this strategy. Meanwhile, Latvijas Banka has adopted its Sustainability Strategy for the first time. It outlines the prospective directions regarding sustainability, i.e. sustainable monetary policy, the financial system, cash circulation, management of foreign reserves and other financial investment and a sustainable institution as a whole. It is not a whim, since we look at both individual work and our shared vision through the lens of sustainability," stresses the Governor of the central bank.

The year 2022 will be very intense and diverse for Latvijas Banka both in relation to monetary policy challenges and the preparations for a successful merger with the FCMC. The target that needs to be met is ensuring the merger of both institutions in such a way that these significant changes get introduced smoothly and seamlessly on 1 January 2023.

"We will continue to work vigorously in the traditional fields of activity by increasingly introducing innovative payment opportunities and instant payments in daily lives of businesses and households, ensuring access to cash across the entire territory of Latvia. We will continue to develop economic research, including also a wider use of the new type of statistical data – data on card-based payments – in the analysis of economic developments, thus helping those implementing the economic policy take better informed decisions," emphasises Mārtiņš Kazāks, Governor of Latvijas Banka.

Latvijas Banka's profit earned in 2021 totalled 20.9 million euro, 70% or 14.6 million euro of which have been appropriated to the central government budget; the rest of the profit has been transferred to the reserves of Latvijas Banka. Over the last five years, Latvijas Banka's aggregate profit has reached 113. 2 million euro, with 78 million euro appropriated to the central government revenue.

More detailed information about Latvijas Banka's accomplishments in 2021 will be available for the first time on a specially designed website and in a specially designed format at: https://annualreport.latvijasbanka.lv (as well as on the usual website at: https://www.bank.lv/en/publications-r/news-and-articles/press-releases/12921-on-the-financial-performance-of-latvijas-banka-in-2021).

The Annual Report of Latvijas Banka for 2021 is available at www.bank.lv. Financial statements of Latvijas Banka for 2021 are also published separately on the website of Latvijas Banka together with an independent auditors' report.