13 September 2007


As the measures of the Government's inflation-curbing plan, particularly those related to the financial sector - deceleration of the pace of lending and stabilisation of prices on the real estate market - are taking effect and the trend is likely to strengthen gradually, the Bank of Latvia Council resolved today to leave the interest rates of the central bank (refinancing, overnight lending facility and overnight deposit facility rates) unchanged. The minimum reserve requirement and its calculation procedure are likewise to remain unchanged.

The Bank of Latvia Council maintains that substantial risks of economic overheating are still in place and in some sectors even becoming stronger, including an upsurge in inflation rate. At the same time, there are certain trends signalling that consistent implementation of the economic stabilisation measures is likely to result in a gradual further "cooling" of the economy in the upcoming periods, with the so-far buoyant pace of growth slowing down. The anti-inflation or economic stabilisation plan is producing first results and requires further action.

The efforts to implement other measures under the plan and, in some areas, to render sustainable previous achievements should continue. In the area of fiscal policy, immediate activities should focus on a budget with a surplus in the amount of 1% of GDP instead of the currently projected balanced budget position for the current year and a considerably larger budget surplus (2%) than the projected 0.2% of GDP for the next year. An urgent action is needed to address the measures under the anti-inflation plan related to enhancing export competitiveness and labour market problems. Step by step, this will lead to both adjustments in the country's external imbalances reflected in the current account deficit and internal instability or inflation rate.

The interest rates set by the Bank of Latvia are as follows:

- refinancing rate - 6.0% per annum;
- overnight deposit facility - 2.0% per annum;
- overnight lending facility - 7.5% per annum.

The refinancing rate has remained unchanged since 18 May 2007 when it was raised by 0.5 percentage point to 6.0%.

The reserve requirement for banks and branches of foreign banks has been 8% as of 24 December 2005.

Consistently with amendments made to the Laws "On Credit Unions", "On Credit Institutions" and "On Insurance Companies and Supervision Thereof", taking effect as of 1 January 2008 and delegating to the Bank of Latvia the issuance of regulations for the development and operation of the Credit Register - an information system providing collection, centralised storage and maintenance of data on all borrowers and their liabilities -, the Bank of Latvia Council approved regulations for the creation of the Credit Register and payments made by the participants of this Register (both documents in effect as of 1 January 2008).

The Bank of Latvia "Regulation for the Credit Register" specifies the information to be submitted to the Bank of Latvia by banks, bank subsidiaries that provide financial services associated with credit risk, as well as insurers and credit unions; the document likewise specifies the data, including procedures for their submission and issuance, provided by the Bank of Latvia from the Credit Register to the above participants of the Credit Register, the Financial and Capital Market Commission and the involved natural and legal persons.

The Bank of Latvia "Regulation for the Payments and Procedure Thereof by the Participants of Credit Register for Use of the Credit Register" stipulates the amount of fees to be paid for the use of the Credit Register and the payment procedure for the participants and the Financial and Capital Market Commission. The maintenance costs of the Credit Register will be equally shared, on the one hand, by its participants and, on the other hand, jointly by the Bank of Latvia and the Financial and Capital Market Commission.