Circular Letter ST.13-0783 — Adoption of the euro by Latvia

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu Ref.: ST.13-0783 Luxembourg, September 2, 2013 Circular Letter To all credit institutions Subject: Adoption of the euro by Latvia

Dear Sirs, Madams,

At the European Council meeting held in Brussels on June 27, 2013, the Heads of State and Government of the European Union decided that, effective January 1, 2014, Latvia would adopt the single currency, the euro.

The objective of this circular letter is to describe the impact of Latvia's adoption of the euro on the preparation of monthly and quarterly statistical reports.

1. Impact on statistical data collection by the BCL

Latvia's accession to the euro area effective January 1, 2014, will have an impact on the preparation of monthly and quarterly statistical reports, as well as on the calculation of reserve requirements to which credit institutions are subject.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu

1.1 Impact on monthly statistical data collection

The monthly statistical reports S 1.1 "Monthly statistical balance sheet of credit institutions", S 1.4 "Information on valuation effects on the balance sheet of credit institutions", S 1.5 "Information on interest rates in EUR", and S 1.8 "Information on securitization transactions carried out by credit institutions" require a breakdown of amounts by the country of residence or registered office of the counterparty, i.e., the country in which the center of economic interest of the counterparty in question is located, distinguishing the following breakdowns:

• All countries: this class groups all operations regardless of the country of residence or registered office of the counterparty
• Luxembourg (LU)
• Other EMU Member States: i.e., Other Member States of the Monetary Union
• Rest of the world: i.e., countries that do not fall into the "Luxembourg" and "Other EMU Member States" categories

From January 1, 2014, the category "Other Member States of the Monetary Union" (Other EMU Member States) will henceforth also include Latvia, which currently, and until December 31, 2013 inclusive, falls under the category "Rest of the world".

Furthermore, credit institutions are reminded that the inclusion of Latvia under the category "Other Member States of the Monetary Union" implies a more detailed sectoral breakdown of assets and liabilities towards counterparties residing in Latvia. The details of this sectoral breakdown can be consulted in the instructions for reports S 1.1 "Monthly statistical balance sheet of credit institutions", S 1.4 "Information on valuation effects on the balance sheet of credit institutions", S 1.5 "Information on interest rates in EUR", as well as S 1.8 "Information on securitization transactions carried out by credit institutions".

Credit institutions are therefore invited to modify their reporting systems to include assets and liabilities towards a counterparty residing in Latvia under the category "Other Member States of the Monetary Union" while ensuring the appropriate sectoral breakdown is performed.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu

1.2 Impact on quarterly statistical data collection

The quarterly statistical report S 2.5 "Quarterly statistical balance sheet of credit institutions" requires a breakdown of amounts by the country of residence or registered office of the counterparty, identifying the country in question by a two-character ISO code.

Since the sectoral breakdown is identical for all countries, Latvia's accession to the euro area has no impact on report S 2.5 "Quarterly statistical balance sheet of credit institutions".

2. Impact on the calculation of reserve requirements

Exposures to the European Central Bank, national central banks (NCBs) members of the Eurosystem, and credit institutions (CIs) that are subject to the Eurosystem's reserve requirement system are excluded from the reserve base. Thus, the volume of exposures included in the reserve base must be reduced by exposures to Latvian credit institutions that are subject to the Eurosystem's reserve requirement system from the reference period of January 2014. The volume of exposures included in the reserve base must also be reduced by exposures to the Latvian central bank.

For the maintenance periods from December 2014 to January 2014, from January to February 2014, and from February to March 2014 (the exact start and end dates of the maintenance periods during 2014 will be published on the BCL website), exposures to the Latvian NCB and to Latvian credit institutions subject to the Eurosystem's reserve requirement system may already be deducted from the reserve base of credit institutions.

Luxembourg credit institutions wishing to take advantage of this possibility must report the table in the annex to the Banque centrale du Luxembourg for the months of October 2013, November 2013, and December 2013, considering Latvian credit institutions as already subject to the Eurosystem's reserve system. In this case, the amount of the reserve requirement reported based on the

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu

monthly statistical report S 1.1 "Monthly statistical balance sheet of credit institutions" will be amended taking into account the information provided based on the aforementioned annex.

Reporting credit institutions are reminded that monthly statistical reports S 1.1, S 1.4, S 1.5, S 1.8, and S 2.5 must obviously be filled out to consider Latvia as not included in the monetary union until December 31, 2013 inclusive.

3. Quality of transmitted data

Relevant institutions are reminded to carefully ensure the correct identification of their counterparties and to use, for this purpose, the official list of credit institutions published by the Commission de Surveillance du Secteur Financier as well as the official list of monetary financial institutions made available to reporting institutions on the European Central Bank's website.

We deem it necessary to once again emphasize the importance of the quality of data transmitted to the BCL and the necessity of subjecting data to detailed verification rules in the technical documentation before transmission. Only rigorous control performed at the time of data production can meet both quality requirements and imposed deadlines. This point is all the more important because the data thus collected will be checked by the ECB services before being aggregated with data from other Member States. Any error or negligence will have damaging repercussions on the reputation of the entire national financial community.

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu

4. Entry into force of the new provisions

The new classification of assets and liabilities towards residents of Latvia is to be performed for the first time when preparing monthly statistical reports relating to the period of January 2014.
The attached table relating to the calculation of reserve requirements concerns the periods of October 2013, November 2013, and December 2013.

Please accept, Sirs, Madams, the assurance of our perfect consideration.

BANQUE CENTRALE DU LUXEMBOURG
Romain Weber Roland Nockels
Head of the Section for Banking and Monetary Statistics Head of the Statistics Department

Annex: 1

2, boulevard Royal L-2983 Luxembourg Fax (+352) 4774-4943 E-mail: reporting.banques@bcl.lu

Annex. Information to be provided to the Banque centrale du Luxembourg for the reduction of the reserve base for the periods of October 2013, November 2013, and December 2013

Item | Country | Currency | Economic Sector | Initial Maturity --- | --- | --- | --- | --- Demand liabilities | Latvia | EUR | NCB + CIs subject to reserves | <= 2 years > 2 years Not allocated
| Latvia | Other currencies | NCB + CIs subject to reserves | |
Time deposits | Latvia | EUR | NCB + CIs subject to reserves | |
| Latvia | Other currencies | NCB + CIs subject to reserves | |
Notice deposits | Latvia | EUR | NCB + CIs subject to reserves | |

Latvia	Other currencies	NCB + CIs subject to reserves
Latvia	EUR	NCB + CIs subject to reserves	Firm repurchase and resale transactions
Latvia	Other currencies	NCB + CIs subject to reserves
Debt securities issued	Latvia	EUR	NCB + CIs subject to reserves
Latvia	Other currencies	NCB + CIs subject to reserves

NCB + CIs subject to reserves: Latvian National Central Bank and credit institutions subject to the Eurosystem's reserve requirement system

The labels of the rows and columns of this table correspond to those used for report S 1.1 to be submitted monthly to the Banque centrale du Luxembourg. Consequently, the credit institutions concerned can rely on the "Definitions and concepts for statistical reporting of credit institutions".