Press Release of May 15, 2003  


At its May 15 regular meeting, the Council of the Bank of Latvia resolved to leave unaltered the refinancing rate and the interest rates on the bank time deposits with the Bank of Latvia and the Lombard loans.

Despite negative trends in the global economy, the Latvian national economy continues to enjoy stable growth. Nevertheless, the future development of lending and private consumption, particularly future fiscal developments and their impact on the current account of Latvia's balance of payments, will be carefully monitored in the light of the monetary policy.

Please, note that the current interest rates set by the Bank of Latvia are as follows: 
- The refinancing rate - 3.0% per year. 
- The interest rates on the bank time deposits with the Bank of Latvia are: 
            - 2.0% per year for 7-day deposits, 
            - 2.25% per year for 14-day deposits. 
- The interest rates on Lombard loans are: 
            - 5.0% per year for loans with maturity of up to 10 days, 
            - 6.0% per year for loans with maturity from 11 to 20 days, 
            - 7.0% per year for loans with maturity of 21 days and more.

The Council of the Bank of Latvia approved the "Regulation for Preparing Interest Rate Reports by Credit Institutions" and the "Regulation for the Use of IBAN", as well as amended the "Regulation for Credit Transfers". 

"Regulation for Preparing Interest Rate Reports by Credit Institutions" (in effect as of January 1, 2004) is necessary for obtaining more detailed statistical data on interest rates for implementing the monetary policy of the Bank of Latvia, forecasting macroeconomic indices and informing the public on interest rates.

The new report stipulated by the regulation will enable to follow the fluctuations of the interest rates on new transactions as it is currently possible, and also those of the interest rates on the transaction balance. That will ensure a possibility to evaluate the profitability of the total loan portfolio of the banking sector, as well as interest expenditure for the maintenance of deposits. Loans issued to private persons will be grouped by type of transaction (consumer credit, housing loans and other credit). A new breakdown by currency has been introduced in the reports, and transactions with customers from the countries of the Economic and Monetary Union will be singled out separately.

Interest rates will be calculated in accordance with the methodology developed by the European Central Bank.

"Regulation for the Use of the IBAN" (in effect as of January 1, 2004, with the transition period for the implementation till January 1, 2005) stipulates the requirements regarding the procedure of providing, validating and using the IBAN in Latvia, to be met by credit institutions and other institutions, registered in the Republic of Latvia, performing funds transfers.

The IBAN (International Bank Account Number) is an international account number standard, developed by the European Committee for Banking Standards and the International Organization for Standardization with the aim of using it internationally to uniquely identify the account of a customer at a financial institution. Currently the IBAN standard is implemented in 32 European countries.

The aim of implementing the IBAN in Latvia is to improve the potential for straight through processing, to reduce the number of erroneous payments and the costs of payment execution, correction and investigation of errors. The regulation provides for the IBAN to be used as a beneficiary's bank account identifier for domestic and cross-border payments in lats and foreign currencies.

Customer account numbers currently used in Latvia differ by structure. The possibility of making a mistake for the originator when identifying the beneficiary's account number increases. Hence the risk of the payment to be rejected, delayed or even transferred to another beneficiary (i.e., as a result of an error in the indicated account number) is higher. The implementation of the IBAN will reduce the possibility of such errors. Customer account numbers will have a uniform structure in all banks in Latvia, and they will contain check digits. Upon receiving a payment order, it will enable the beneficiary's bank to check whether the beneficiary's account number with the beneficiary's bank, indicated in the payment document, exists in Latvia, and thus prevent erroneous funds transfers.

The IBAN in Latvia will consist of 21 characters: 2 letters (the country code) + 2 digits (check digits) + 4 letters (the bank's BIC) + 13 digits (the account number; for those account numbers which currently are shorter, zeros will be added for the missing digits). For example, if the customer's account number is 876543210, the corresponding IBAN will be LV34 BANK 0000 8765 4321 0.

The introduction of the IBAN will help Latvia's financial system in complying with the provisions of the Regulation (EC) No 2560/2001 "On Cross-border Payments in Euro", with respect to using the IBAN in EU cross-border payments. The regulation provides for the duty of banks to communicate to each customer its IBAN, and the duty for customers to indicate it in all cross-border invoices of goods and services within the European Economic area (the EU countries, Iceland, Liechtenstein and Norway); a supplier who accepts payment by transfer shall communicate its IBAN to its customers. Compliance with the requirements of the Regulation will be essential both for banks and all those customers who encounter cross-border payments within the European Economic area in their operations: the customer shall, upon request, communicate to the institution carrying out the transfer the IBAN of the beneficiary otherwise additional charges may be levied on him by the institution.

Pursuant to the "Regulation for the Use of the IBAN", banks will provide IBAN numbers to their customers, and they will replace the current account numbers, serving as the sole identifier of the customer. The Latvian IBAN corresponds to the standard of the international account number; by structure it is like other internationally used identifiers of customer account numbers in other countries, and it will be recognised in cross-border payment documents in any country where the IBAN standard has been implemented. Banks and Latvijas Pasts will have to ensure transition to the use of the IBAN, replacing customers' current account numbers by January 1, 2005. All institutions involved in the process have an opportunity to get ready for that in good time, informing their customers - account holders and originators - about the course of the gradual transition. The Bank of Latvia will also provide further information to the public.

Amendment to the "Regulation for Credit Transfers" (in effect as of January 1, 2004) was made in view of the introduction of the international bank account number standard IBAN in Latvia as of January 1, 2004.