2008-10-16 On Raising Government Guaranteed Compensation up to EUR 50 000 in Latvian banks

16.10.2008
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Riga, 16 October 2008

Press Release

On Raising Government Guaranteed Compensation up to EUR 50 000 in Latvian banks

The Parliament (Saeima) of the Republic of Latvia today has passed amendments to the Latvian Deposit Guarantee Law that envisage raising a state guaranteed compensation to the clients of the Latvian banks and credit unions (both to natural and legal persons) up to EUR 50 000 (LVL 35 000). The amendments to the Law have been made in order to follow the decision taken at the meeting of the Council of Economic and Finance Ministers (ECOFIN) on 7 October 2008 to increase minimum guaranteed deposits in the European Union member states to 50 000 euros. Therefore in case of possible unavailability of deposits, 50 000 euros (35 000 lats) are guaranteed to all the clients of the Latvian banks (including the clients of branches of Latvian banks) per depositor per each bank (all accounts added together, if several accounts at one bank in one name). The Government guaranteed compensation covers deposits, current account balance, salary accounts, savings accounts etc.

In case of necessity the state guaranteed compensation is paid from the Deposit Guarantee Fund (hereinafter – the Fund). Accumulation and management of the funds is ensured by the Financial and Capital Market Commission (hereinafter – the FCMC). At the end of July 2008, LVL 77.7 million were accumulated in the Fund. As from 1998 the Fund has been made up of a single payment from the Government budget totalling 0.5 million lats and a single payment of the Bank of Latvia totalling 0.5 million lats. Currently, the funds have been accumulated from quarterly payments of deposit takers (i.e. banks and credit unions), as well as income from managing the funds of the Fund. In 2007, additional income from the managing of the Fund amounted to 2.4 million lats, which was ensured by making investments in the Latvian treasury bonds.

In accordance with the Deposit Guarantee Law, in case of unavailability of deposits in the Fund for paying out the guaranteed compensations the FCMC shall pay compensations from the Government budget. Since the establishment of the Fund, there has been no such case of unavailability of deposits in Latvia where it would be required to pay compensations from the Fund.

Currently, 26 banks are operating in Latvia of which 5 are branches of foreign banks.

Ieva Upleja
Public Relations Adviser
Chairwoman’s Office
Financial and Capital Market Commission
phone: +371 6777 4807
e-mail:ieva.upleja@fktk.lv

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