The financial management system of Latvijas Banka has been developed to support decision-making processes, financial risk management, and efficient use of financial resources. The major financial transactions of Latvijas Banka are centred around the management of financial assets and the execution of monetary policy.
Chart 1. Balance sheet of Latvijas Banka (assets/liabilities (–); millions of euro)
The assets of Latvijas Banka saw a decline of 729 million euro in 2024. The main changes in assets and liabilities were as follows:
- the balance sheet item "Securities held for monetary policy purposes" experienced a 1470 million euro decrease due to the redemption of securities purchased by Latvijas Banka under the public sector purchase programme and the pandemic emergency purchase programme. The amount of loans granted to credit institutions by Latvijas Banka as a result of longer-term refinancing operations dropped by 93 million euro following their repayment.
- due to cross-border payments, liabilities to the ECB for the settlement result in TARGET declined by 2801 million euro;
- the volume of credit institutions' deposits amounted to 1723 million euro, mainly owing to an increase in the Eurosystem's deposit facility used by credit institutions to make overnight deposits at a pre-specified interest rate.
Latvijas Banka concluded 2024 with financial results that exceeded expectations, despite the negative results of monetary policy operations stemming from the interest rate hikes implemented by the Governing Council of the ECB in previous years to curb inflation in the euro area. The total recognised gains of Latvijas Banka amounted to 214 million euro (143 million euro in 2023), leading to an increase in Latvijas Banka's capital and reserves by 30% (to 944 million euro).
Through effective management of Latvijas Banka's gold and financial investments, their value rose by 399 million euro or 7% over the year, notably surpassing the increase in the value of the respective investments in 2023 (296 million euro).
Chart 2. Overall financial result of Latvijas Banka (millions of euro)
Although euro interest rates have been significantly reduced since June 2024, the average euro interest rate for the year remained higher than in 2023. This led to a further increase in Latvijas Banka's net monetary policy operation expenses compared to 2023, rising to 158 million euro (140 million euro in 2023). Interest expenses on deposits from Latvian credit institutions totalled 238 million euro (174 million euro in 2023), while interest expenses on deposits from the Latvian government amounted to 41 million euro (45 million euro in 2023).
The increase in the market value of financial investments achieved in 2024, totalling 399 million euro, includes 120 million euro reflected in the profit and loss statement. Meanwhile, 279 million euro, in accordance with Eurosystem accounting principles, is recorded in the total capital and reserves as a revaluation reserve, rather than being reflected in the profit and loss statement. Therefore, despite a positive overall recognised profit of 214 million euro, a loss of 65 million euro was recorded in the profit and loss statement. In accordance with the Law on Latvijas Banka, the loss is covered by the reserve capital set aside for such situations, ensuring that the central bank's ability to fulfil its responsibilities remains unaffected and without incurring expenses for the state.