Opinion of the European Central Bank of 5 November 2010 on amendments to the monetary policy operations framework with a view to further harmonising it with the Eurosystem (CON/2010/77)
Date: 2010-11-05
Institutions: European Central Bank
Subjects: Eurosystem, Latvia, monetary integration, monetary policy, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 5 November 2010  

on amendments to the monetary policy operations framework with a view to further harmonising it 

with the Eurosystem 

(CON/2010/77) 

Introduction and legal basis 

On  8  October  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  whose 

currency is not 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  further  harmonise  the  monetary  policy  operations 

framework of Latvijas Banka with that of the Eurosystem by (i) updating valuation haircuts to assets rated 

AAA/Aaa to A–/A3; (ii) introducing a new set of valuation haircuts for BBB+/Baa1 to BBB–/Baa3 rated 

assets and repealing the existing 5% additional valuation haircut regarding these assets; and (iii) imposing 

an additional valuation haircut in the form of a valuation markdown of 5% to theoretically valued covered 

bank bonds and other debt instruments issued by credit institutions. 

2. 

Observations 

2.1  Although  Member  States  whose  currency  is  not  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 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
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. 

2.2  The  ECB  has  previously  commented  on  the  Regulation  on  the  use  of  Latvijas  Banka’s  monetary 
policy  instruments,  as  well  as  other  regulations  relating  to  monetary  policy  instruments2.  In  its 

opinions, the ECB emphasises the need to further align the Latvian minimum reserves regime with 

Eurosystem standards, including the point that contrary to the current arrangements Latvian credit 

unions will be subject to the Eurosystem’s minimum reserves requirements when Latvia adopts the 

euro. The ECB notes that all comments previously made on the Latvian minimum reserves regime 

still remain valid. 

2.3  The  ECB  welcomes  the  amendments  to  risk  control  measures  introduced  by  the  draft  legislation 

that  will  contribute  to  the  alignment  of  the  monetary  policy  operations  frameworks  of  Latvijas 

Banka and the Eurosystem.  

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

Done at Frankfurt am Main, 5 November 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

2  

See ECB Opinions CON/2006/11, CON/2006/49, CON/2007/12, CON/2008/89 and CON/2010/18. All ECB opinions are 
published on the ECB’s website at www.ecb.europa.eu. 

2