Central Bank Independence in Transition Economies

8B. Objectives, Formulation of Monetary Policy and Relations with other 

State Institutions 

The main task of the Bank is protecting the price stability in the State. Other 

objectives mentioned in the Law are “facilitating free competition, effective allocation 

and circulation of assets and the stability, co-ordination and supervision of the 

financial system” (Art. 3). The Board of Governors determines and ensures the 

implementation of the monetary policy in accordance with these tasks (Art. 13, 26). 

The Minister of Finance participates in the meetings of the Board of Governors but 

with no right to vote. If the Minister of Finance does not accept the Board's decision, 

he has a right to postpone the execution of the decision for ten days (Art. 25). The 

decision is executed if the Board does not change it during this period (Art. 25). The 

Bank acts as a consultant of the Government and the Parliament on monetary and 

banking policy (Art. 6). The Governor is entitled to participate in the Government 

meetings (Art. 28). The Parliament supervises the economic activity of the Bank and 

                                              

10

 Source: Law “On the Bank of Latvia” (19 May, 1992), “Amendments to the Law 'On the 

Bank of Latvia'” (18 June, 1997). 

Other sources: Handbook of Central Banks in Central and Eastern Europe, BIS  1995.  

---