EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 5 November 2010  
on amendments to the monetary policy operations fr amework with a view to further harmonising it 
with the Eurosystem 
(CON/2010/77) 
 
Introduction and legal basis  
On 8 October 2010 the European Central Bank (ECB) received a request from Latvijas Banka for an 
opinion on draft amendments to the Regulation on the use of Latvijas Banka’s monetary policy 
instruments (hereinafter the ‘draft legislation’). 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and Article 2(2)  of Council Decision 98/415/EC of 29 June 1998 on 
the consultation of the European Central Bank by  national authorities regarding draft legislative 
provisions1, as the draft legislation relates to instruments of monetary policy in a Member State whose 
currency is not the euro. In  accordance with the first sentence of Artic le 17.5 of the Rules of Procedure of 
the European Central Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft legislation 
The main objective of the draft legislation is to  further harmonise the monetary policy operations 
framework of Latvijas Banka with that of the Eurosyst em by (i) updating valuation haircuts to assets rated 
AAA/Aaa to A–/A3; (ii) introducing a new set of va luation haircuts for BBB+/Baa1 to BBB–/Baa3 rated 
assets and repealing the existing 5% additional valuat ion haircut regarding these assets; and (iii) imposing 
an additional valuation haircut in the form of a valu ation markdown of 5% to th eoretically valued covered 
bank bonds and other debt instrume nts issued by credit institutions. 
 2. Observations 2.1 Although Member States whose currency is not the euro retain their powers in the field of 
monetary policy, it is nevertheless beneficial for them to gradually achieve  consistency with the 
operational framework for the implementation of the ECB’s monetary policy so that credit 
institutions operating in their territories can beco me acquainted with the requirements that will 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 apply once these Member States have adopted the euro. Such gradual harmonisation prior to the 
adoption of the euro will contribute to the smooth integration of the national central bank into the 
Eurosystem. 
2.2 The ECB has previously commented on the Regul ation on the use of Latvijas Banka’s monetary 
policy instruments, as well as other regulations relating to monetary policy instruments2. In its 
opinions, the ECB emphasises the need to further align the Latvian minimum reserves regime with 
Eurosystem standards, including the point that c ontrary to the current arrangements Latvian credit 
unions will be subject to the Eurosystem’s mini mum reserves requirements when Latvia adopts the 
euro. The ECB notes that all comments previously made on the Latvian mini mum reserves regime 
still remain valid. 
2.3 The ECB welcomes the amendments to risk c ontrol measures introduced by the draft legislation 
that will contribute to the alignment of the m onetary policy operations frameworks of Latvijas 
Banka and the Eurosystem.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 5 November 2010. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
2  See ECB Opinions CON/2006/11, CON/2006/49, CON/2007/ 12, CON/2008/89 and CON/2010/18. All ECB opinions are 
published on the ECB’s webs ite at www.ecb.europa.eu.