Central Bank of Latvia to propose setting the Deposit Guarantee Fund target at 3% of total deposits

The Central Bank of Latvia announced that it will prepare and submit to the Ministry of Finance proposed amendments to the Deposit Guarantee Law that would set a new target for Latvia’s Deposit Guarantee Fund (DGF) at 3% of total deposits held in Latvian credit institutions and credit unions. The change is intended to reduce medium- and long-term contributions to the DGF by banks and credit unions once the target is reached, and to set a maximum threshold at which payments to the fund can be discontinued. The DGF currently stands at 2.46% of all covered deposits (almost EUR 300 million). The central bank noted that it invests DGF funds to generate income, reporting returns of EUR 5.4 million in 2023, EUR 8.3 million in 2024 and EUR 4.5 million in the first three quarters of 2025. On its provisional calculations, the 3% target would be achieved in 2027; after that, annual pay-ins would fall to around 0.09% of covered deposits, or about EUR 9 million per year, compared with an average of EUR 22 million per year currently. The central bank also pointed to alternative back-up financing tools, including extraordinary contributions and loans from market participants, and reiterated that depositors are guaranteed compensation of up to EUR 100,000 per bank or credit union. The proposal is expected to be submitted to the Ministry of Finance in the coming weeks; financial market participants and the Finance Latvia Association have already been informed about the planned approach.