Opinion of the European Central Bank of 23 February 2010 on the introduction of a seven-day deposit facility (CON/2010/18)
Date: 2010-02-23
Institutions: European Central Bank
Subjects: Latvia, monetary integration, monetary policy, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 23 February 2010  

on the introduction of a seven-day deposit facility 

(CON/2010/18) 

Introduction and legal basis 

On  8  February  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 that has 

not adopted the euro. 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 legislation 

The  main  objective  of  the  draft  legislation  is  to  amend  the  Regulation  on  the  use  of  Latvijas  Banka’s 

monetary  policy  instruments  (hereinafter  the  ‘Regulation’),  introducing  a  standing  seven-day  deposit 

facility. 

2. 

Observations 

2.1  The  consulting  authority  has  informed  the  ECB  that  the  draft  legislation  is  to  be  adopted  by 

11 March 2010.  In  view  thereof,  the  consulting  authority  would  seem  to  invoke  the  exemption 

provided  for  in  Article  3(2)  of  Council  Decision  98/415/EC,  which  allows  for  a  reduction  of  the 

minimum time limit for submission of the ECB’s opinion of one month in case of extreme urgency, 

and asks the ECB to deliver its opinion by 24 February 2010. The ECB, however, wishes to draw 

the  consulting  authority’s  attention  to  the  fact  that  the  second  sentence  of  Article  4  of 

Decision 98/415/EC  states  that  the  ECB  must  be  consulted  ‘at  an  appropriate  stage’  in  the 

legislative process. This implies that the consultation should take place at a point in the legislative 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
process that affords the ECB sufficient time to examine the draft legislative provisions and to adopt 

its  opinion  in  the  required  language  versions  and  which  also  enables  the  relevant  national 

authorities  to  take  the  ECB’s  opinion  into  consideration  before  the  legislative  provisions  are 

adopted. 

2.2  Although Member States that have not adopted 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  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 contribute to the smooth integration of the national central bank into the Eurosystem. 

In  this  context,  the  ECB  draws  Latvijas  Banka’s  attention  to  the  fact  that  a  seven-day  deposit 

facility does not exist in the operational framework for the implementation of the ECB’s monetary 

policy, which comprises an overnight deposit facility. Thus, such a seven-day deposit facility will 

need  to  be  phased  out  at  the  latest  when  Latvia  adopts  the  euro.  The  ECB  understands  that  such 

phasing out could be performed expeditiously.  

2.3  The ECB previously commented on the Regulation and other regulations in the field of monetary 
policy  instruments2.  In  its  opinions,  the  ECB  emphasises  the  need  to  further  align  the  Latvian 

minimum  reserves  regime  with  Eurosystem  standards  and  makes  the  point  that  Latvian  credit 

unions should also be subject to reserve requirements when Latvia adopts the euro. The ECB notes 

that all comments previously made on the Latvian minimum reserves regime still remain valid. 

2.4  The ECB understands from the Explanatory Note to the draft legislation that the introduction of the 

seven-day deposit facility is aimed at facilitating liquidity management in view of the continuous 

rise  in  the  liquidity  surplus  related  to  the  new  policy  of  the  Latvian  Treasury  to  exchange  their 

funds  for  lats  exclusively  off-market  at  Latvijas  Banka.  The  ECB  underlines  the  importance  of 

conducting these off-market transactions at prevailing market conditions so that they do not lead to 

any  preferential  treatment  of  the  Latvian  Treasury  and  are  fully  in  line  with  Article 124  of  the 

Treaty.  

This opinion will be published on the ECB’s website. 

2  

See ECB Opinions CON/2006/49, CON/2007/12, CON/2008/89 and CON/2006/11. All ECB opinions are published on 
the ECB’s website at www.ecb.europa.eu. 

2 

 
 
 
                                                 
Done at Frankfurt am Main, 23 February 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

3