Saeima Supports Latvian Bank's Proposal to Set NGF Target Volume at 3% of Covered Deposits

04.06.2026.

Supervisory News

The Saeima today, in the final reading, supported the proposal developed by the Latvian Bank and promoted by the Ministry of Finance to amend the Deposit Guarantee Act, setting the target volume of the Deposit Guarantee Fund (NGF) at 3% of the total volume of covered deposits attracted by Latvian credit institutions and savings and loan associations.

As a result of this step, the competitiveness of the Latvian financial sector and economy will increase. In the medium and long term, the volume of credit institution contributions to the NGF will decrease, and it will be precisely determined at what level contributions to the NGF are halted.

The amendments to the Deposit Guarantee Act provide for the cancellation of the one-time initial payment to the NGF for newly established credit institutions and savings and loan associations, in order to facilitate the entry of new market participants into the Latvian financial sector.

The amendments also grant the Latvian Bank the right to use income generated from the investment of NGF funds to cover the Latvian Bank's expenses related to fund management and the operation of the guaranteed compensation system.

The current level of the NGF is 2.4% of the covered deposits of all its participants (almost 315 million euros). The Latvian Bank actively invests NGF funds, generating interest income and increasing the fund's volume. In 2023, managing NGF funds generated income of 5.4 million euros, and in 2024 – 8.3 million euros. Data on the results of NGF fund management for 2025 will be published in the coming weeks.

According to the Latvian Bank's preliminary calculations, the NGF target volume of 3% will be reached in 2027, as the Latvian banking sector undergoes structural changes. After reaching the target volume, credit institution contributions to the fund will decrease to approximately 0.09% of covered deposits per year, or approximately 9 million euros (currently, NGF participants contribute an average of 22 million euros per year). At the same time, the Latvian Bank has alternative NGF financing mechanisms (e.g., additional emergency contributions or borrowing from market participants) to ensure the protection of depositors' interests if necessary.

Any client of Latvian banks and savings and loan associations – both natural and legal persons – is guaranteed compensation for all types of deposits in all currencies up to 100,000 euros per bank or savings and loan association (in all accounts combined, if there are multiple accounts in one bank) in accordance with the Deposit Guarantee Act. The state-guaranteed amount applies to deposits, settlement account balances, salary accounts, savings accounts, etc.

The NGF was established to ensure the payment of compensation to depositors for deposits made with a participant in the deposit guarantee system that have become unavailable, i.e., if a participant in the deposit guarantee system is unable to pay out the depositor's funds and the license of the deposit-accepting entity is revoked or the court declares it insolvent, or in other cases where the Latvian Bank has determined that the deposit-accepting entity is unable to pay out the depositor's funds and has made a decision on the unavailability of deposits. The NGF was established and operates on the basis of the Deposit Guarantee Act.

The Latvian Bank carries out the accumulation, management, and payment of guaranteed compensation from NGF funds.

The Deposit Guarantee Act stipulates: if the NGF does not have sufficient funds to make guaranteed compensation payments in accordance with the law, the Latvian Bank may conclude a loan agreement to borrow the missing amount from a deposit-accepting entity or a deposit guarantee fund of another member state. And finally, if other borrowing options are exhausted, the Ministry of Finance provides state budget funds for the payment of guaranteed compensation.

Fund funds are accumulated from quarterly payments by deposit-accepting entities (i.e., banks and savings and loan associations), which are the percentage specified in the Deposit Guarantee Act of the volume of attracted covered deposits, adjusted by a risk coefficient, as well as from income generated from the management of NGF funds.

NGF participants are deposit-accepting entities that are banks registered in Latvia (including branches of these banks in EU member states) and, in cases provided for by the Deposit Guarantee Act, branches of EU member state banks in Latvia, as well as branches of foreign banks and savings and loan associations.