The Eurosystem comprises the euro area central banks and the European Central Bank (ECB). With Latvia having joined the euro area on 1 January 2014, Latvijas Banka became a member of the Eurosystem.
The objective of the Eurosystem is to ensure price stability in the euro area; thus Latvijas Banka also takes part in maintaining the price stability in the euro area. The primary tasks of the Eurosystem are establishing and implementing monetary policy for the euro area, ensuring production and circulation of the euro banknotes, holding and managing the foreign currency reserves of the euro area countries, promoting smooth operation of the payment systems as well as ensuring financial stability in the euro area and collecting statistics both from the national authorities and directly from the economic agents.
The decision-making bodies of the Eurosystem are the Governing Council of the ECB (the members of the Executive Board of the ECB and the Governors of the euro area central banks) and the Executive Board of the ECB (President and Vice President of the ECB and four other members of the Board).
The Governing Council of the ECB meets twice a month. The Governing Council formulates monetary policy for the euro area, adopts guidelines and takes decisions necessary to ensure the fulfilment of the tasks entrusted to the Eurosystem and the ESCB. The decisions are adopted by the Governing Council according to a rotation system.
The Executive Board of the ECB implements the monetary policy of the euro area in accordance with the guidelines developed and decisions taken by the Governing Council, prepares the Governing Council meetings and manages the day-to-day business of the ECB.
In their activities, the decision-making bodies of the Eurosystem are independent: neither the ECB nor the central banks of the Eurosystem may ask for or accept instructions from other institutions.
European System of Central Banks
The European System of Central Banks (ESCB) comprises the central banks of all EU Member States. They implement the national monetary policy and do not engage in the decision-making and implementation of the single monetary policy of the euro area.
The General Council of the ECB takes decisions within the ESCB. The General Council primarily pursues ECB's advisory functions: outlines the ECB Annual Report, collects statistics and takes decisions on the ECB's human resources policy and similar matters. The General Council meets four times a year. This decision-making body of the ESCB will exist as long as there are EU Member States which have not yet adopted the euro.
Committees and Working Groups of the Eurosystem/the ESCB
Committees and Working Groups of the Eurosystem/the ESCB are responsible for drafting documents and conducting analysis on matters to be discussed by the decision-making bodies of the Eurosystem and the ESCB, covering the following areas: monetary policy, banking supervision, cash circulation, statistics, payment systems, market operations, accounting, international relations, human resources policy, audit, security, etc. The decisions taken at the Governing Council and the General Council meetings are based on the work of the Committees of the Eurosystem/the ESCB.
Latvijas Banka in the Eurosystem and the ESCB
The Governor of Latvijas Banka represents Latvijas Banka at the meetings of the Governing Council of the ECB, taking part in the processes affecting developments in the euro area and quite often in other regions as well.
Representatives of Latvijas Banka are involved in the work of the Committees, Working Groups and the Human Resources Conference of the Eurosystem/the ESCB, drafting, analysing and preparing documents on matters to be discussed by the ECB's decision-making bodies.
Having joined the Eurosystem, Latvijas Banka continues to ensure the circulation of coins and banknotes, take care of the safety of money, provide interbank settlements, collect financial statistics, represent Latvia in international financial institutions, raise public awareness of issues related to economic developments and processes in Latvia, the euro area and the rest of the world as well as perform other tasks important for the Latvian population and government that are in line with the Eurosystem's functions and tasks.