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)
Date: 2006-04-03
Institutions: European Central Bank
Subjects: Eurosystem, Latvia, central bank, monetary integration, national law

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 Latvijas 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  the  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  Latvijas  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 participation in international monetary institutions. 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 will enter into force immediately after its adoption by 

the Latvian Parliament. The ECB also understands from the consultation letter that the Law on Latvijas 

Banka  will  be  further  amended  as  a  separate  exercise.  Therefore,  this  opinion  will  not  comment  on 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
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 Eurosystem. However, the ECB  notes that to comply with 

Article 109 of the Treaty, Latvian national legislation had 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 integration 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 instructions 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  paragraph  in  Article  7  of  the  Law  on  Latvijas  Banka 

which  recognises  the  ECB’s  right  to  approve  Latvijas  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  Governor  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  unable  to  perform  their  functions  for  a  period 

exceeding six successive months because of illness. The ECB’s Convergence Report 2004, as well 

as  ECB  opinion  CON/2005/20  of  14  June  2005,  concluded  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  fully  with  Article  14.2  of  the  Statute.  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  Law  on  the  financial  instruments  market  defines 

financial instruments as ‘an agreement, which concurrently creates financial 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 

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proposed wording of Article 35 appears to be sufficiently wide to cover all transactions enumerated 

under Article 18.1 of the Statute. 

3.5  Finally, the ECB notes the amendments to Article 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  with  the  regime  adopted  under  Article  19  of  the 
Statute and the relevant Community law2. 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  concerning  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 September 2003 on the application 
of minimum reserves, OJ L 250, 2.10.2003, p. 10. 

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