On Thursday, 4 June, the Saeima adopted, in the final reading, urgent amendments to the Deposit Guarantee Law. The amendments introduce changes to the Fund’s financing arrangements and administrative framework, with a view to enhancing the competitiveness of Latvia’s financial sector and facilitating the entry of new market participants.
“The purpose of the amendments is to promote the entry of new financial market participants into Latvia and, in the medium and long term, to reduce costs for credit institutions and savings and loan associations. At the same time, they will strengthen the stability of the financing of the Deposit Guarantee Fund, reduce the administrative burden, and improve the competitiveness of the Fund’s participants,” previously noted Anda Čakša, Chair of the Budget and Finance (Taxation) Committee responsible for steering the bill through the Saeima.
The amendments abolish the one-off initial contribution that newly established credit institutions and credit unions were required to make to the Deposit Guarantee Fund upon obtaining a licence, thereby reducing financial barriers to market entry. At the same time, they introduce a clearer and more predictable framework for calculating contributions, including the establishment of a threshold upon reaching which contributions to the Fund are suspended.
The amendments set a target level for the Deposit Guarantee Fund at 3% of the total amount of covered deposits of the Fund’s participants, thus establishing, for the first time, a clear upper limit for mandatory contributions. This will enable credit institutions and credit unions to plan their expenses more accurately and will reduce the payment burden once the target level has been reached.
The Law also delegates to the Bank of Latvia the authority to determine the technical arrangements for calculating and making contributions, ensuring a stable, predictable, and uniform funding framework for the Fund throughout the year. At the same time, the Law retains the core principles and target levels and ensures compliance with the requirements of the European Union.
The amendments further allow income derived from the management of the Fund to be used to cover the Fund’s operating costs and the expenses of the guaranteed compensation system. This will reduce additional payments by financial market participants and promote a more efficient operation of the system.
Saeima Press Service