On April 8, Latvian Saeima approved amendments to the Law on the Bank of Latvia. Changes are suggested for the structure of the central bank and responsibilities of its various managing bodies.
The Saeima this week declared amendments urgent and had them reviewed in two readings.
The proposed changes provide for altering the management model of the Bank of Latvia to ensure more efficient decision-making and information exchange within the institution, as explained in the annotation.
Currently the Bank of Latvia employs a two-level management system: the Council of the Bank of Latvia makes decisions on behalf of the central bank and the Board of the Bank of Latvia executes the practical side of management, as well as orders from the council. At the same time, certain functions are delegated to the governor of the Bank of Latvia.
The Saeima committee explained in the annotation accompanying the legislative act that single and two-level management systems were common around the world.
Such models are found in Eurozone as well, with clear dominance of single-level model, particularly in Lithuania, which as an economy and development level is similar to Latvia’s.
Proposed amendments suggest certain changes to the management composition of the central bank, including the termination of the Board of the Bank of Latvia, striking from the law the norms that govern the composition and operations of the board, as well as the responsibility of the chairman of the board.
As a result of the proposed changes, all decisions, except for those for which the governor of the bank is responsible for, are to be delegated to the Council of the Bank of Latvia.
According to the State Administration Structure Law, the manager of an institution is responsible for matters of work organization unless stated otherwise in regulatory acts.
The Council of the Bank of Latvia is responsible for organization of work on the level of regulatory acts, notes the Budget and Finance Committee.
Amendments also state the governor of the Bank of Latvia is to be made in charge of the institution’s administrative affairs, which include management of financial, human and other resources. The governor will also be in charge of dictating the duties of the bank’s employees, hiring and termination of employees, organization of development of the bank’s action plan and budget requests.
Proposed amendments also suggest giving the governor of the Bank of Latvia the right to delegate the management of certain aspects of the management process to members of the council or heads of departments.
Amendments also suggest changing the entity responsible for making decisions when it comes to the structure of the Bank of Latvia. The current redaction of the Law on the Bank of Latvia states that the structure of the bank is dictated by its governor, whereas officials are approved in their posts by the council. Instead the council will be in charge of both of these functions.
Amendments are set to come into effect on June 1.
Last year the governor of the Bank of Latvia Martins Kazaks said he reduced his wage when he came to office. He also said none of the members of the central bank’s council are provided with private transports. Additionally, he said the central bank reduced the number of employees 10% in 2020 from 479 to 426.
“We are actively looking for ways to do things better and more efficiently. My goal isn’t creating the numerically smallest bank. No. My goal is making the most powerful central bank in the region, one that would benefit people the most,” he said.
The said the issue with efficiency is an issue regarding the entire management model of the Bank of Latvia.
“At the end of 2019 we had six council members and six board members in the Bank of Latvia. Now we’re down to six council members and three board members. Starting with next year we will have six council members only and no board whatsoever. This means the top management of the Bank of Latvia is reduced by half – from twelve to six. The council will take on duties previously performed by the board. Members will convene every week or even more often if necessary,” said Kazaks. (BNN/Business World Magazine)
