The Council of Latvijas Banka has approved the Annual Report of Latvijas Banka for 2016. Apart from the financial statements and auditors' report, it provides an overview of the economic environment and economic developments 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 and promoting smooth operation of the payment systems' infrastructure; compilation and publishing of statistics; maintaining the Credit Register, etc.
The year 2016 was a rather eventful period for the global economy, and the leading central banks continued to pursue an active monetary policy. In the euro area as well, balance was sought between the goals of sustainable development and solutions to topical problems by injecting additional financing into the economy.
In 2015 and 2016, Latvijas Banka purchased securities of the Latvian government and euro area international organisations for a total of 4.4 billion euro; 1.1 billion euro of this amount went to the system of Latvian credit institutions. Although the monetary policy transmission mechanism is yet to function flawlessly and credit institutions are reluctant to grant loans, a part of this money entered the real economy and promoted lending growth. Overall economic growth has accelerated. Nevertheless, already in the nearest future both the euro area at large and Latvia in particular will have to face crucial challenges related to modernisation of the economy and laying the foundations for sustainable growth.
Last year Latvijas Banka continued looking for ways to be ever more effective in discharging its important public functions, including the use of the latest modern technologies. Latvijas Banka actively continued to upgrade its interbank settlement system in preparation for the introduction of instant payments. Modernisation of the infrastructure of Latvijas Banka means that with the support of credit institutions Latvia's businesses and general public will be able to use interbank transfers executed within a few seconds, 24 hours a day, seven days a week already in 2017.
Another important event was the opening of a central national currency authentication centre in Latvijas Banka as of 1 July 2016. The central bank's experts are responsible for examination of all suspicious banknotes and coins received from cash collection services, population and the State Police. By executing this important function at Latvijas Banka, the expert examination process has become more efficient, suspected counterfeit submitters receive answers more promptly, government expenditure for the discharge of this function has been reduced, and the Police can now allot more resources to their primary functions.
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 of the Eurosystem's monetary policy, related decision-making and implementation.
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 the leading 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.
Furthermore, acting in the public and economic interests, Latvijas Banka carries out the following main tasks within the Eurosystem:
– manage the foreign reserves and other financial investments;
– 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 and promotes their smooth operation;
– 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 operation.