OREANDA-NEWS. September 23, 2013. In its regular meeting today, the Bank of Latvia Council discussed the latest macroeconomic tendencies in Latvia, took decisions regarding future monetary policy directions as well as adopted several regulations for a successful and smooth euro changeover as of 1 January 2014.

Taking into account the fact that inflation indicators in Latvia remain lower than predicted earlier and the rate of economic development does not present risks for price stability in the medium term while lending is weaker than foreseen, the Bank of Latvia Council today resolved to reduce the interest rates set by the Bank of Latvia:

The Bank of Latvia refinancing rate from 2.0% to 1.5%;

the interest rates on the marginal lending facility:

using the facility for no more than five working days within the previous 30 day period, from 2.5% to 2.0%,

using the facility for no more than ten working days within the previous 30 day period, from 4.75% to 3.50%,

and using the facility for more than ten working days within the previous 30 day period, from 7.0% to 5.0%.

The bank deposit facility rates and the reserve requirement have not changed.

The changes will become effective on 24 September 2013.

The Report of the Governor of the Bank of Latvia, Ilmars Rimsevics, at 16 September press conference will be available in the news section of the Bank of Latvia’s home page www.bank.lv.
According to the "Latvian National Euro Changeover Plan", the Bank of Latvia Council has approved the "Procedure for the Preliminary Supply and Second Stage of Preliminary Supply of Euro Banknotes and Coins" (to take effect on 17.09.2013.). This document regulates a timely supply process of euro banknotes and coins from the Bank of Latvia to commercial banks in November and early December and then from commercial banks to their corporate customers as of 10 December.

The procedure includes a sample of the mutual agreement between the Bank of Latvia and a credit institution on the preliminary supply of euro banknotes and coins.

Delivering the euro from the Bank of Latvia to credit institutions, several requirements will be in force, including the requirement that the received euro banknotes and coins are not to be circulated before the euro changeover day and must be accounted for and stored separately.

The credit institution will be responsible for its corporate customer to comply with these requirements and, with that in view, the procedure provides for conditions that must be observed as the credit institution signs a contract with its client regarding the preliminary supply of euro.

The Bank of Latvia approved the "Regulation for the Processing and Reissue of Euro Banknotes and Coins" (to take effect on 01.01.2014.), which has been developed taking into account various European Commission regulations on measures for protecting the euro against forgery.

The Regulation provides for the procedure to be observed by credit institutions and merchants providing money transportation and processing services or are involved in the purchases and sales of foreign cash currencies etc. They must register with the Bank of Latvia and ensure that the euro banknotes and coins that they have received and are planning to put into circulation are real (authentic) and fit for circulation; only certified equipment is to be used for automated processing of euro banknotes and coins.

The Bank of Latvia Council approved the "Regulation for Servicing of Bank of Latvia's Customer Accounts" (to take effect on 01.01.2014.). The document provides for the procedure to be observed in opening a settlement account with the Bank of Latvia and its servicing by a credit institution, which is not a participant in the TARGET2-Latvija system, and a cooperative credit union, as well as for the procedure for an indirect participation in the Bank of Latvia electronic clearing system (ECS) (to take effect on 01.04.2014.). The Bank of Latvia does not pay interest on the positive balance in a customer's settlement account, except for maintaining the mandatory reserve.

The Bank of Latvia Council made amendments to the "Procedure for Participating in the Bank of Latvia Electronic Clearing System" (to take effect on 30.09.2013). The Bank of Latvia ECS system performs payment exchange with the systems SEPAClearer and STEP2 (the largest European customer payment system). As of 30 September, the SEPAClearer system, with which the ECS system has a link, there will be seven cycles of settlement (instead of the current four) to align with the changes in the STEP2 system. Thus, in order to ensure a continued effective exchange of payments, the amendments will allow the number of settlement cycles in the ECS system also to be increase to seven as well as to change their times to align them with those of the SEPAClearer. That will prolong the chance for banks to serve their clients – from 12:00 to 14:00 –, to complete the settlement within the same day.

The amendments, which will take effect on 1 January 2014, also provide for the discontinue of settlements in lats part of the Electronic Clearing System (the last settlement day in lats in this system will be 30 December 2013).

The Bank of Latvia provides the credit institutions with effective payment systems that comply with international requirements in order to promote smooth operations of payment systems in Latvia. Currently, there are three such payment systems: SAMS for large value payments in lats, the Latvian component of European-scale euro gross payment system TARGET2-Latvija and the electronic clearing system in lats and euro ECS. These are fully automated and safe systems that provide the credit institutions with the opportunity to conduct both domestic and cross border payments in Europe.

After the euro changeover on 1 January 2014, the Bank of Latvia will continue to provide TARGET2-Latvija and ECS operations in euro (the lats part of ECS and the lats payment system SAMS will terminate their operations at the end of this year).

The Bank of Latvia Council approved the "Amendments to the Bank of Latvia Regulation No. 93 "Regulation for the Credit Register" of 13 September 2012". The document provides for changes that would allow natural persons to receive information about themselves included in the Credit Register interactively by authentication on the Credit Register's website for electronic servicing of natural persons (address: https://manidati.kreg.lv) upon presenting a person's identity document issued in the Republic of Latvia (the eID card) (to take effect on 01.10.2013.) and to align this regulation with the euro changeover (to take effect on 01.01.2014.).

Synchronously, the Bank of Latvia Council approved the "Regulation for the Exchange of Electronic Information with the Bank of Latvia" providing both for the submission reserve base and calculations for periods of execution that will end in the first three months of 2014 (to take effect on 01.10.2013.) and amending the formats of the Credit Register information exchange and statistics submission (to take effect on 01.01.2014.), as well as amending the functional changes in the Credit Register approved in March of this year (to take effect on 01.07.2014.).