Latvian central bank posts 54 million euro loss

Latvias Banka (LB), the Latvian central bank, posted its financial results for 2023 on April 24, including an overall loss of 54 million euros for the year. 

"Latvijas Banka concluded 2023 with losses of 54 million euro, which were absorbed from the reserve capital established specifically for such purposes pursuant to the Law on Latvijas Banka. The losses do not impair the central bank's ability to implement an effective monetary policy and do not incur expenses for the state," said the central bank.

LB said the figures represented "better financial results than previously projected, given the global geopolitical and economic developments that prompted the European Central Bank to raise interest rates significantly to tame inflation in the euro area."

Latvijas Banka's gold and financial investments saw their value rise by 298 million euro or 5% per annum during the year. Consequently, the total amount of Latvijas Banka's capital and reserves increased by 143 million euro or 24%, totalling 730 million euro at the end of the year. Meanwhile, Latvijas Banka's expense on deposits increased significantly as the European Central Bank raised interest rates. Interest expense on deposits from Latvian credit institutions amounted to 174 million euro, while those from the Latvian government – to 45 million euro.

Apparently attempting to head off likely criticism, LB explained that "Similar financial results are also expected to be achieved by many other central banks, given their primary focus on the fulfilment of the main task of the central banks – the implementation of monetary policy – in circumstances that require decisive action to contain the surge in prices. With the monetary stance changing and the interest rates declining, Latvijas Banka and other central banks are expected to return to profit generation in the medium term."

Central bank governor Mārtiņš Kazāks described 2023 as "a productive and fruitful year for Latvijas Banka"

"A secure and developed financial sector, a better accessibility of financial services and a bona fide customer-friendly banking sector represent the domains where substantial progress has been made and where our efforts will also persist in the future. The year has also been successful in terms of fulfilling the most important task of the central bank, namely to implement a decisive monetary policy and utilise it to tame inflation in Latvia and the euro area. The inflation dragon has been tamed, paving the way for gradual interest rate cuts already in the near future. The foundations have been laid for a new cycle of economic growth to begin in 2024," said Kazāks.

The full financial results are available to view online here.

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