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Press Release of July 13, 2000

  

 

On July 13, 2000, during its regular meeting the Bank of Latvia's Council resolved to leave unaltered the refinancing rates and the interest rates for bank deposits with the Bank of Latvia and for lombard credits.

Please note that the interest rates set by the Bank of Latvia are as follows:
- refinancing rate - 3.5% per annum;
- interest rates for bank deposits with the Bank of Latvia:
            - for 7 days - 1.5% per annum;
            - for 14 days - 1.75% per annum;
- interest rates for lombard rates:
            - up to 10 days - 5.5% per annum;
            - 11 - 20 days - 6.5% per annum;
            - over 21 days - 7.5% per annum.

On July 13, 2000, the Council of the Bank of Latvia also approved the "Guidelines for Developing Procedures for Identifying Suspicious Financial Transactions" and the "Regulation for Securities Settlement System Organised by the Bank of Latvia", a new version of the "Regulation for Issuing the Bank of Latvia Lombard Loans" and the "Regulation for Compiling Information on External Payments of Non-banks", as well as amended the "Regulation for Consolidated Supervision of Banks". 

Pursuant to the Law "On the Prevention of Laundering of Proceeds Derived from Criminal Activity", credit institutions and other financial institutions shall report to the Disclosures Office unusual and suspicious financial transactions. When credit and financial institutions know or suspect that such transactions are carried out on behalf of third parties, they shall do their best to identify such third parties. To establish signs of suspicious transactions and to identify third parties, the Bank of Latvia has developed the "Guidelines for Developing Procedures for Identifying Suspicious Financial Transactions".

Core principle 15 of effective banking supervision as issued by the Basle Committee for Banking Supervision also requires supervisory authorities to ensure that banks implement appropriate policies and procedures to prevent the use of banks for laundering of proceeds derived from criminal activity. The aim of such policies and procedures is to introduce the "know-your-customer" rules in banks and make them aware of their customers' activities and cash flows associated with such activities. The "Guidelines for Developing Procedures for Identifying Suspicious Financial Transactions" are in compliance with the above international requirements and their introduction will complete the implementation of the above principle for effective banking supervision.

The "Regulation for Securities Settlement System Organised by the Bank of Latvia" (former title the "Provision for Accounting of Latvian Government Securities") regulates securities settlement transactions in the Bank of Latvia.

A new document regulating the Bank of Latvia's securities transactions was adopted to 1) expand the range of securities eligible for the Bank of Latvia's monetary operations and to allow using private sector fixed income securities in addition to state securities for such transactions; 2) outline the operation principles for the Bank of Latvia's securities settlement system and particularly for insolvency cases involving system participants; 3) establish that the Bank of Latvia and banks have discretion in dealing with securities pledges in compliance with European Union (EU) Directive 98/26/EC "On Completing Settlements in Settlements and Payments Systems".

The new regulation shall become effective as of September 8, 2000.

Amendments to the "Regulation for Issuing the Bank of Latvia's Lombard Loans" have been developed to ensure implementation of the new real time gross settlement system (RTGS) in the Bank of Latvia and full compliance with the EU Directive 98/26/EC "On Completing Settlements in Settlements and Payments Systems".

New procedures for granting the Bank of Latvia's intra-day credit facility have been developed, as, upon the introduction of the real time gross settlement system, banks themselves will have to determine and pledge certain amounts of securities to receive the Bank of Latvia's intra-day credit facilities.

- Procedures for repaying lombard credits have been changed: the Bank of Latvia will no longer debit funds from bank accounts. Banks will be obliged to pay funds as repayment of lombard credits to the Bank of Latvia via the real time gross settlement system.

- The article outlining the Bank of Latvia's rights in cases where banks have defaulted on their liabilities to repay lombard credits to the Bank of Latvia has been supplemented.

The new version of the Regulation shall become effective as of September 8, 2000.

As of November 1, 1998, the Bank of Latvia, pursuant to the "Regulation for Preparing Information on External Payments of Non-banks ", gathers statistical information on non-bank external payments. Use of this source of information has contributed to the improvement and facilitation of the process of compiling the national balance of payments. Considering the experience gained in compiling the national balance of payments and the requirements outlined in the 5th edition of the International Monetary Fund "Balance of Payments Manual", as well as the European Union Statistics Office and the European Central Bank's guidelines on compiling and publishing balance of payments and balance of international investments, a new version of the Regulation has been developed and adopted.

The most significant amendments are outlined below:
- The effective regulation prescribes collecting information only on non-bank external payments made in domestic banks, while the new version stipulates that non-banks will also notify the Bank of Latvia about external payments made via foreign banks.
- The regulation clarifies the definition of external payments.
- As all banks submit the "Report on Non-bank External Payments" electronically, the new version of the regulation does not provide for submission of a paper version of the above report.

Considering the Latvian Commercial Bank Association's proposal regarding amendments to this Regulation, the Bank of Latvia will compile and send to banks additional information describing features of external payments.

The new version of the regulation will become effective on January 1, 2000.

The "Regulation on Consolidated Supervision of Banks" was amended as, during the period after its adoption, three new normative documents (the "Regulation for Calculating Capital Adequacy", the "Regulation for Complying with Restrictions on Exposures" and the "Regulation for Compiling Reports on Credit Institutions Investments") have become effective, changing the procedures for calculating credit institutions' performance indicators were changed.

The procedures for calculating a consolidated group's capital adequacy have been supplemented with capital requirements for market risks. Procedures for calculating restrictions on large exposures of consolidation groups and for submitting the respective reports have been streamlined reflecting the breakdown of exposures by banking book and trading book. The requirements for compiling consolidation group reports on investments have been restated, and a number of other improvements have also been made. For consolidated supervision purposes, the Regulation has been supplemented by six new report forms.

The amendments will be in effect as of August 1, 2000, and the banks will be required to compile their first consolidated statements and calculations of performance indicators in accordance with said amendments for the third quarter of 2000.