The compensation schemes in Latvia are:
- The Deposit Guarantee Fund (DGF);
- The Fund for the Protection of the Insured (FPI);
- The Financial Instrument Market Customers (Investors) Protection Scheme.
Deposit Guarantee Fund Members of the DGF make quarterly contributions to the DGF of 0.05% of the average balance of the deposits covered in the previous quarter, multiplied by the adjustment coefficient calculated using a fixed formula. The DGF evaluates the performance indicators of its members and calculates the adjustment coefficients for the contributions to the DGF. The average adjustment coefficient for Latvia's credit institutions was 116% in 2023, and 126% in 2022, and it was 90.62% for cooperative credit institutions and 92.24% in 2022.
Deposit-takers made contributions of 21.5 million euro to the DGF in 2023.
Following the integration of Latvijas Banka and the FCMC, Latvijas Banka focused on the access of depositors to the deposit guarantee scheme, and successfully improved the process for disbursing the guaranteed compensation by developing a new information technology solution that uses a remote, user-friendly and accessible procedure for disbursing the guaranteed compensation to depositors that was first used when the guaranteed compensation was paid out to the depositors of Baltic International Bank SE.
During the year, Latvijas Banka ensured the disbursement of the guaranteed compensation to the depositors of AS Latvijas Krājbanka, ABLV Bank AS, and AS PNB Banka, which were all in liquidation; the liquidated LABA Kooperatīvā Krājaizdevu sabiedrība; and the insolvent Baltic International Bank SE. The amounts compensated were those stipulated in the Deposit Guarantee Law:
- 99 thousand euro to the depositors of LAS Latvijas Krājbanka;
- 2191 thousand euro to the depositors of LAS ABLV Bank;
- 1435 thousand euro to the depositors of LAS PNB Banka;
- 33 116 thousand euro to the depositors of the insolvent Baltic International Bank SE;
- 25 thousand euro to the depositors of the liquidated LABA KKS.
Disbursement of the guaranteed compensation to the depositors of LAS TRASTA KOMERCBANKA is being made by the administrator from the bank's own resources.
Depositors have five years as of the day when the deposits became unavailable to apply for the guaranteed compensation, and that period lapsed on 4 March 2021 for LAS TRASTA KOMERCBANKA and on 23 February 2023 for LAS ABLV Bank, while it will expire on 12 June 2024 for LAS Latvijas Krājbanka and 31 December 2029 for underage depositors, and on 15 August 2024 for LAS PNB Banka. Disbursements of the guaranteed compensation to the depositors in the insolvent Baltic International Bank SE will continue until 12 December 2027, and to the depositors in the liquidated LABA KKS until 14 July 2025.
Section 19(7) of the Deposit Guarantee Law states that if a sworn bailiff or tax administration has not subjected the financial means of a depositor to enforcement within five years from the day when the deposits become unavailable, the restrictions imposed by the sworn bailiff or tax administration on the disbursement of the guaranteed compensation expire; this date will be 3 March 2026 for LAS TRASTA KOMERCBANKA, and 23 February 2028 for LAS ABLV Bank. If the disbursement of the guaranteed compensation has been deferred under Section 27(1) of the Deposit Guarantee Law though, the depositors will be able to receive the compensation after the circumstances that caused the disbursement to be deferred have ceased to exist.
Latvijas Banka was responsible for the accumulation and management of the DGF in 2023, and its balance at the end of the year was 229.9 million euro. The basic principle in managing the DGF assets is to ensure a high level of liquidity. In 2023, the DGF assets were invested in short-term, liquid, fixed- income, investment-grade, euro area government securities with a maturity of up to 12 months. The annual return on investment was 2.72%.
Regular stress-testing of the DGF is carried out under the provisions of the Deposit Guarantee Law. In 2023, the lists of the recipients of guaranteed compensation of all the credit institutions and cooperative credit unions were inspected. Their ability to prepare a list of depositors and submit the required information to Latvijas Banka in the format specified and within the deadlines was tested. Following the stress test results, Latvijas Banka provided explanations where necessary on how the information requested should be prepared, and after the test the bank sent letters to the market participants requesting improvements to their internal control systems.
Fund for the Protection of the Insured The assets of the FPI consist of the contributions from insurance companies of 0.1% of the total gross insurance premiums received from natural persons for the classes of insurance specified by law. Since its inception, guaranteed compensation of 12.3 thousand euro has been disbursed from the FPI. Since the accumulated holdings of the FPI exceeded the amount stipulated in Section 288 of the Insurance and Reinsurance Law at the end of 2015, contributions to the FPI have been suspended since 2016. At the end of 2023, there were 19.8 million euro in the FPI. The FPI assets were also invested in short-term, liquid, fixed-income, investment- grade, euro area government securities with a maturity of up to 12 months, and the annual return on investment was 2.84% in 2023.
Protection of the customers of the financial instrument market (investors) The investor protection scheme is based on the Investor Protection Law. Compensation for each investor is limited to 20,000 euro and disbursements of compensation are ensured by Latvijas Banka. The Investor Protection Law does not provide for the accumulation of any funds for disbursing compensation, but the resources can if necessary be provided by the system participants or legal entities that have been authorised to provide investment services. The Investor Protection Law was improved in 2023 when the principles of the investor protection scheme were updated. The amendments updated the provisions of the Law to take account of current developments in the investment market and the opportunities for practical application of the protection scheme. The procedure for organising and implementing the investor protection scheme has been adjusted, the requirements for the provision, processing and storage of the information required to organise the disbursement of compensation have been supplemented, and the procedures for communicating to the investor the conditions they must fulfil in order to receive compensation for the investment have been made, while the size of the compensation, the procedure for disbursement and the time frame for it have been further elaborated.
