EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 3 April 2006  
at the request of Latvijas Banka 
on a draft law amending the Law on Latvijas Banka 
(CON/2006/19) 
 
Introduction and legal basis  
On 21 February 2006 the European Central Bank (ECB)  received a request from Latvijas Banka for an 
opinion on a draft law amending the Law on La tvijas Banka (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third indent of Article 2(1) 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 law relates to a national central bank (NCB). In accordance with the first sentence 
of Article 17.5 of the Rules of Procedure of th e European Central Bank, the Governing Council has 
adopted this opinion. 
 1.  Purpose of the draft law 
The draft law’s main objective is to further enhance the compatibility of the Law on Latvijas Banka with 
the Treaty and the Statute of the European System of  Central Banks and of the European Central Bank 
(hereinafter the ‘Statute’). It provides that La tvijas Banka is a member of the ESCB and acts in 
accordance with the ECB’s guidelines  and instructions. In addition, it recognises the ECB’s right to 
approve Latvijas Banka’s par ticipation in international monetary in stitutions. The draft law also clarifies 
several other provisions of the Law on Latvijas Banka  and aligns their terminology with other Latvian 
laws. 
 2. General observations  According to the consultation letter, the draft law w ill enter into force immediately after its adoption by 
the Latvian Parliament. The ECB also understands fr om the consultation letter that the Law on Latvijas 
Banka will be further amended as a separate exer cise. Therefore, this opinion will not comment on 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2 provisions of the current Law on Latvijas Banka that will have to be adapted for Latvia to adopt the euro 
and Latvijas Banka to be integrated into the Eurosy stem. However, the ECB notes that to comply with 
Article 109 of the Treaty, Latvian national legislation ha d to be adjusted to ensure its compatibility with 
the Treaty and the Statute by 1 May 2004. This process is expected to be finalised in time for the 2006 
convergence report. Nevertheless, national legislation integrating an NCB into the Eurosystem need only 
enter into force when such integra tion becomes effective, i.e. the date on which the Member State with a 
derogation adopts the euro. 
 3. Specific observations 3.1 The ECB welcomes the proposed new wording of Article 2 of the Law on Latvijas Banka according 
to which Latvijas Banka is a member of the ESCB and subject to the ESCB regulatory framework (although the reference to guidelines and instructi ons of course become relevant only on Latvijas 
Banka’s full integration in the Eurosystem in accordance with Article 14.3 of the Statute). 
3.2 The ECB also welcomes the proposed new paragr aph in Article 7 of the Law on Latvijas Banka 
which recognises the ECB’s right to approve Latv ijas Banka’s participation in international 
monetary institutions as it brings the Law into line  with Article 6.2 of the Statute. The ECB notes, 
however, that under Article 43.1 of the Statute this  particular provision applies from the date of 
Latvijas Banka’s integration into the Eurosystem . Therefore the proposed amendment should enter 
into force on the date on which Latvia adopts the euro. 
3.3 The ECB notes that the draft law does not deal with the personal independence of the members of 
Latvijas Banka’s Council (hereinafter the ‘Council ’). The grounds for dismissal of the Governor, 
Deputy Governor and other members of the Council currently laid down in Article 22 of the Law 
on Latvijas Banka are that: (1) they have submitted their resignation; or (2) a court sentence against 
the Governor of Latvijas Banka, the Deputy Gove rnor or other member of the Council for an 
intentional crime has taken legal effect; or (3) the Governor of Latvijas Banka, the Deputy 
Governor or other member of the Council is un able to perform their functions for a period 
exceeding six successive months because of illn ess. The ECB’s Convergence Report 2004, as well 
as ECB opinion CON/2005/20 of 14 June 2005, conc luded that the grounds for dismissal of 
Latvijas Banka’s Governor currently laid down in  Article 22 of the Law on Latvijas Banka require 
further adaptation to comply full y with Article 14.2 of the Stat ute. The ECB therefore proposes  
already addressing this in the draft law as it is of immediate relevance. 
3.4 The draft law amends Article 35 of the Law on Latvijas Banka so that Latvijas Banka may operate 
in financial markets of Latvia, Member States of the European Union and abroad by transacting in 
financial instruments and precious metals. The La w on the financial instruments market defines 
financial instruments as ‘an agreement, which conc urrently creates financia l assets for one person, 
but financial liabilities or capital securities for another’ . This is a rather wide definition and appears 
to cover also lending and borrowing of claims such  as, for example, bank loans. Accordingly, the 
3 proposed wording of Article 35 appears to be suffici ently wide to cover all transactions enumerated 
under Article 18.1 of the Statute. 
3.5 Finally, the ECB notes the amendments to Artic le 38 of the Law on Latvijas Banka which provide 
for minimum reserve requirements. It is noted, however, that these measures do not contribute to further aligning Latvian reserve requirements w ith the regime adopted under Article 19 of the 
Statute and the relevant Community law
2. Thus, the Article will have to be amended again, prior to 
integration of Latvijas Banka into the Eurosystem. 
 
This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 3 April 2006. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
2  Council Regulation (EC) No 2531/98 of 23 November 1998 co ncerning the application of minimum reserves by the 
European Central Bank, OJ L 318, 27.11.1998, p. 1 and Regulation/ECB/2003/9 of 12 Sept ember 2003 on the application 
of minimum reserves, OJ L 250, 2.10.2003, p. 10.