RIGA, April 24 (LETA) - The Bank of Latvia last year posted EUR 54 million in losses in contrast to a year before which was closed without a profit or losses, LETA learned from the bank.

The bank's representatives informed that the bank concluded 2023 with 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.

As a result of successful management of the central bank's gold and financial investments, their value rose by EUR 298 million or 5 percent per annum during the year. Consequently, the total amount of the bank's capital and reserves increased by EUR 143 million or 24 percent, totaling EUR 730 million at the end of the year. 

Meanwhile, the Bank of Latvia expense on deposits increased significantly as the European Central Bank raised interest rates. Interest expense on deposits from Latvian credit institutions amounted to EUR 174 million, while those from the Latvian government – to EUR 45 million.

Given the above increase in interest expense, the Bank of Latvia concluded 2023 with losses of EUR 54 million, which were absorbed from the reserve capital established specifically for such purposes pursuant to the law. The losses do not impair the central bank's ability to implement an effective monetary policy and do not incur expenses for the state.

The Bank of Latvia appropriated EUR 58 million to the state budget last year: the above amount of EUR 45 million being appropriated as interest on government deposits with the central bank and an additional amount of EUR 13 million – through taxes.

The bank noted 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, the Bank of Latvia and other central banks are expected to return to profit generation in the medium term.

"2023 was a productive and fruitful year for the Bank of Latvia," said the bank's president Martins Kazaks.

He said that 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 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 Kazaks.

The Council of the Bank of Latvia has approved the Annual Report of Latvijas Banka for 2023. In addition to the financial statements for 2023 and the unqualified independent auditors' report, it covers the last year's economic environment and economic development in Latvia and the euro area as well as provides information on the operation of the national central bank and its accomplishments in the areas within its mandate.

The financial statements were audited by independent external auditors recommended by the Governing Council of the European Central Bank and approved by the Council of the European Union.