Last year, the Bank of Latvia operated with losses of EUR 54 million. 2022 was concluded by the central bank without losses or profits, as reported by the Bank of Latvia.
At the same time, Bank of Latvia representatives say that the bank did conclude 2023 with better financial results than expected, considering the global geopolitical and economic developments, because of which the European Central bank was forced to significantly raise interest rates in order to limit inflation in Eurozone.
The Bank of Latvia also mentioned that by successfully managing the bank’s gold and financial investments, it was possible to raise their value by EUR 298 million or 5%. This helped grow the capital and reserve volume of the Bank of Latvia by EUR 143 million or 24%, reaching EUR 739 million by the end of the year.
The European Central Bank’s decision to raise interest rates caused deposit expenditures of the Bank of Latvia to go up significantly.
Interest expenditures of Latvian credit institutions’ deposits reached EUR 174 million, and for Latvian government’s deposits expenditures reached EUR 45 million.
“Considering the growth of the aforementioned interest expenditures, the Bank of Latvia concluded the year 2023 with losses worth EUR 54 million. These losses will be covered using the bank’s own reserve capital, which was created specifically for such occasions. The losses do not lower the central bank’s ability to implement an effective monetary policy and do not create costs for the state,” representatives of the Bank of Latvia stress.
Last year, the Bank of Latvia paid EUR 58 million to the state budget. This includes EUR 45 million as interest for the government’s deposits in the central bank and EUR 13 million in taxes.
The Bank of Latvia notes that similar financial results can be expected for many other central banks, as they are mainly related to the fulfilment of the central banks’ main task – the formation and implementation of monetary policy – in circumstances where decisive action is needed to halt rapid price increases. As the monetary policy stance changes and interest rates decline, the Bank of Latvia and other central banks are expected to return to profitability in the medium term.
The Bank of Latvia also notes that the main purpose of central banks is implementing the monetary policy, not gaining profits.
“2023 was a productive year for the Bank of Latvia,” says Governor of the Bank of Latvia Mārtiņš Kazāks.
He mentions that a secure and developed financial sector, better accessibility of financial services and customer-friendly banking sector are the direction in which a lot was done and will continue to be done.
“The dragon of inflation is pinned on the ground, and soon enough it will be possible to start a gradual lowering of interest rates. The foundation is set for a new economic growth cycle to commence in 2024,” says Kazāks.
The Council of the Bank of Latvia has confirmed the bank’s account for 2023. In accordance with the Bank of Latvia Law, the financial statement was audited by independent external auditors recommended by the Council of the European Central Bank and approved by the Council of the European Union. The Bank of Latvia has received a positive opinion on its financial statement for 2023 from the auditor “Ernst & Young Baltic” LLC.
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