The Single Resolution Mechanism has been in place since 2015. Latvijas Banka, as the resolution authority in Latvia, is a member of the SRM, and together with the Single Resolution Board and other national resolution authorities of EU Member States, it is constantly working to improve and strengthen the SRM. Resolution covers credit institutions and investment firms that are subject to the requirements of the Law on the Recovery and Resolution of Credit Institutions and Investment Firms. The prudential regulation and supervision of those institutions aim to ensure stable operation to mitigate the risk of liquidity and solvency crises to the maximum extent possible. Despite the resolution, credit institutions and investment firms are private market participants and they may face problems, including the risk of insolvency. If insolvency is inevitable, despite prudential regulation and supervision, the task of the resolution authorities is to safeguard financial stability by minimising disruptions to the economy and protecting taxpayers from losses.

As part of the SRM, processes that ensure the assessment of the resolvability of credit institutions and investment firms in addition to the implementation of regulation measures have been developed and strengthened. At the same time, the strengthening of the operational readiness for potential financial sector crisis scenarios should continue to ensure that Latvijas Banka, as the national regulation body, has access to a comprehensive set of statutory instruments. It is important for an institution to be able to respond to potential risk cases in a timely and efficient manner, implement the statutory regulation measures and any re-structuring, re-capitalisation, or asset and liabilities transfer strategy that may be needed according to the statutory requirements.

The functions of the resolution authority for credit institutions that are subject to direct supervision within the framework of the SSM and cross-border credit institution groups are discharged by the SRB. At the same time, Latvijas Banka's representatives participate in the resolution processes implemented by the SRB and in preparing the SRB's decisions, as well as implementing the decisions adopted by the SRB, including those related to setting the minimum requirement for own funds and eligible liabilities. Three Latvian credit institutions and one branch of a credit institution from another EU Member State, accounting for 83% of the total assets of credit institutions, were under the direct responsibility of the SRB in 2025. Latvijas Banka as the national resolution authority is responsible for the resolution function for the remaining seven credit institutions and three investment firms.

In 2025, the framework for recovery and resolution of insurance undertakings was launched. Proposals for the draft law "Law on recovery and resolution of insurance and reinsurance undertakings" to transpose the requirements of the Recovery and resolution of insurance and reinsurance undertakings directive will become effective on 30 January 2027. In 2026, Latvia will continue to actively develop and enforce this framework, including by implementing EIOPA guidelines and preparing for the practical application of the framework.

In 2025, the priorities in the resolution were:

  • to continue the operationalisation of the resolution mechanism. Latvijas Banka continued participation in the EC's structural support project 23EE09 Technical support for national handbooks for Estonia, Lithuania and Latvia. Within the framework of this project, the operationalisation process for the application of resolution tools was developed and organised. During the project, a resolution manual was drafted that includes decisions, model agreements, procedures, methodologies, and other aspects related to the application of resolutions tools. This project is an important step in strengthening the resolution process and ensuring that it can be implemented effectively if needed;
  • to ensure resolution plans are kept up to date and to approve decisions on the minimum requirements for own funds and eligible liabilities.

Resolution plans are reviewed and updated on a regular basis (at least once per year), considering market developments and changes in the respective institutions to ensure that they are ready for potential crisis situations.

In 2025, according to business models and risks, Latvijas Banka updated ten credit institutions' resolution plans, including seven such plans in the direct remit of Latvijas Banka, and two resolution plans of investment firms.

The success of a failing institution’s resolution is highly dependant on whether the institution has sufficient minimum own funds and eligible liabilities to allow it to absorb losses or recapitalise in a crisis. Pursuant to the Law on Recovery of Activities and Resolution of Credit Institutions and Investment Firms, the minimum own capital and eligible liabilities requirement is not established for entities undergoing liquidation. It can be established if it is found that the liquidation of the institution will affect the DGF or financial stability and the financial system. In 2025, Latvijas Banka established the minimum own capital and eligible liabilities requirement for one institution in its direct remit, as well as adopted three implementation decisions on the minimum own capital and eligible liabilities requirement established by the SRB.

In close cooperation with the national resolution authorities, including Latvijas Banka, the SRB is responsible for calculating the annual ex ante contribution payable to the SRF by each institution under the provisions of the SRB Regulation, and for managing and using the SRF. The objective of the SRF is to provide funding that can be called upon in a crisis to resolve a credit institution. The SRF was built up from contributions made by credit institutions in EU Member States, including those in Latvia, with a target level of at least 1% of the amount of the deposits covered at the credit institutions of all the participating EU Member States.

The target level of the SRF is reviewed annually and was reached (81 billion euro) as of 31 December 2025. Since 2015, the contributions made by Latvia's credit institutions to the SRF have amounted to EUR 52.3 million. No contributions will be made by credit institutions in 2026 unless the fund is called upon to support a resolution during the year.