EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 30 April 2007 
at the request of Latvijas Banka 
on draft amendments to the Regulation on the use of Latvijas Banka’s monetary policy 
instruments and the Regulation on Latvij as Banka’s securities settlement system  
(CON/2007/12)  
 
Introduction and legal basis  
On 3 April 2007 the European Central Bank (ECB) recei ved a request from Latvijas Banka for an opinion 
on draft amendments to the Regulation on the use of  Latvijas Banka’s monetary policy instruments and 
draft amendments to the Regulation on Latvijas Ba nka’s securities settlement system (hereinafter 
collectively the ‘draft amendments’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third and fifth indents of  Article 2(1), 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 amendments relate to a national central bank (NCB), 
payment and settlement systems and the instruments of monetary policy. In accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft regulation 
The main objective of the draft amendments is to ad just the eligibility criteria for counterparties that 
participate in Latvijas Banka’s monetary policy opera tions. They aim to restrict access to such monetary 
policy operations to credit institutions that are subject  to Latvijas Banka’s minimum reserve requirements. 
Furthermore, taking into account the fact that the primary operational objective of Latvijas Banka’s securities settlement system (hereinafter the ‘VNS’) is to ensure securities settlement for monetary policy 
operations, the draft amendments apply similar access criteria for participation in the VNS. The ECB has 
previously delivered opinions on the two Regulations that are now being amended
2. 
 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
2  See ECB Opinion CON/2006/49 of 23 October 2006 at the request of Latvijas Banka on a draf t regulation for the use of 
Latvijas Banka’s monetary policy in struments and ECB Opinion CON/2006/52 of  14 November 2006 at the request of 
Latvijas Banka on a draft regulation on Latvij as Banka’s securities settlement system. 
2 2. General observations  
2.1 Although non-participating Member States retain th eir powers in the field of monetary policy, it is 
nevertheless beneficial for them to gradually ach ieve consistency with Eurosystem standards so 
that credit institutions operating in their territo ries can become acquainted with the requirements 
that will apply once these Member States have adopt ed the euro. Such gradual harmonisation prior 
to the adoption of the euro will assist a smooth integration of the NCB into the Eurosystem. 
2.2 ECB notes that, on adoption of the euro in Latvia , and provided that the VNS is selected to provide 
securities settlement of central bank credit ope rations, the VNS will be assessed against the 
Eurosystem standards for the use of EU securities settlement systems in ESCB credit operations3. 
For that reason, this opinion is  without prejudice to a future ECB assessment of the VNS against 
the abovementioned standards.  
2.3 The ECB expects Latvijas Banka to ensure that the VNS complies with the Latvian Law on 
settlement finality in payment and security settlement systems.  
 3. Specific observations 3.1 The ECB notes that a reference to minimum re serves in the amendment to Article 1.1 of the 
Regulation on the use of Latvijas Banka’s moneta ry policy instruments would further align the 
Latvian definition of counterparties with the one applied by the Eurosystem. 
3.2 Under Article 1.1 of the Regulation on Latv ijas Banka’s securities settlement system the VNS’s 
primary, but not sole, operational objective is to  ensure securities settlement of Latvijas Banka’s 
monetary and intraday credit operations. As long as the VNS legally remains open for other kinds 
of operations (e.g. trading of government debt), restricting participation in a securities settlement 
system by excluding EU/EEA credit institutions that  do not have branches in Latvia would appear 
to represent a restriction on freedom to provide (and receive) services, which is prohibited by Article 49 of the Treaty. Therefore, the ECB would welcome a formulation that would also allow EU/EEA credit institutions which do not have br anches in Latvia to participate in the VNS. 
 
This opinion will be published on the ECB’s website. 
 
Done at Frankfurt am Main, 30 April 2007. 
[signed] 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
3  The standards are av ailable on the ECB’s website at www.ecb.int.