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 Latvijas Banka’s securities settlement system (CON/2007/12)
Date: 2007-04-30
Institutions: European Central Bank
Subjects: Latvia, foreign-exchange reserves, monetary policy, national law, payment system

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 Latvijas Banka’s securities settlement system  

(CON/2007/12)  

Introduction and legal basis 

On 3 April 2007 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 and 

draft  amendments  to  the  Regulation  on  Latvijas  Banka’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  adjust  the  eligibility  criteria  for  counterparties  that 

participate in Latvijas Banka’s monetary policy operations. 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 amended2. 

1  
2  

OJ L 189, 3.7.1998, p. 42.  
See ECB Opinion CON/2006/49 of 23 October 2006 at the request of Latvijas Banka on a draft regulation for the use of 
Latvijas Banka’s monetary policy instruments and ECB Opinion CON/2006/52 of 14 November 2006 at the request of 
Latvijas Banka on a draft regulation on Latvijas Banka’s securities settlement system. 

 
 
 
 
 
                                                 
2. 

General observations  

2.1  Although non-participating Member States retain their powers in the field of monetary policy, it is 

nevertheless  beneficial  for  them  to  gradually  achieve  consistency  with  Eurosystem  standards  so 

that  credit  institutions  operating  in  their  territories  can  become  acquainted  with  the  requirements 

that will apply once these Member States have adopted 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  operations,  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  reserves  in  the  amendment  to  Article  1.1  of  the 

Regulation  on  the  use  of  Latvijas  Banka’s  monetary  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  Latvijas  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 branches 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. 

3  

The standards are available on the ECB’s website at www.ecb.int. 

2 

[signed] 

The President of the ECB 

Jean-Claude TRICHET