Process of Latvijas Banka's foundation (1918-1922): joint endeavours in an independent state

Ineta Lipša, Dr. hist.

"Once we have a state of our own, a bank of issue is needed which is legally entitled to put our own money  in circulation!" What shape should a currency issuing central bank of the newly founded Latvian state take –  contents of this idea went through fundamental transformations between 1919 and 1922.

The idea of establishing a bank of issue or currency-issuing central bank in Latvia went through a fundamental transformation between 1919 and 1922. Initially the Cabinet of Ministers of the Republic of Latvia had envisaged it in the shape of a joint-stock company  with private shareholders, but no trustworthy foreign entrepreneur could be attracted to the project. There were plenty of candidates but their appetites for profit were larger than anything that the Latvian financial policy makers were prepared to offer. It became clear at the end of 1920 that cooperation planned with British financiers was not succeeding and over the course of 1921 prospective partners from other countries left the scene of negotiations.

The path to establishing a state-financed issuing bank in Latvia can be retraced in drafts of  the Statute of the Bank of Latvia and in subsequent corrections and adjusted updates, which echoed talks of the Latvian finance minister and diplomats with  foreign financiers. The thought itself of the need to establish the Bank of Latvia  was voiced in the press already in 1919, but the ongoing war of independence meant that the first clarification regarding the establishment of a currency-issuing bank was published only on March 1, 2020. Three basic options of the project were outlined in a succession on June 15, 2021, February and March 14, 1922, respectively.

Contents

I. 1920: Attempts to attract foreign capital

Latvian national central bank as an English-Latvian bank project
Latvian-Finnish bank: rejection of the idea of a private foreign bank
The idea of a joint Baltic bank of issue

II.1921: Involving Latvian diplomatic representatives and the public in the establishment of a bank of issue

Popular involvement: an appeal from the Minister of Finance 
The initial publication of the draft Statute of the Bank of Latvia
The Diplomatic effort

To be continued...