Latvia’s Ministry of Finance announced that it is developing a proposal for a temporary solidarity contribution from credit institutions to support national security on 18 September 2024. Solidarity contributions are planned to apply from 2025 to 2027.
The developed model proposes that credit institutions boost their contributions to the national budget, thereby generating funding to meet the increasing national security demands of the coming years. The proposed contribution will follow Lithuania’s model, applying a 60% rate on net interest income, which is much higher than pre-Euribor rate hikes, leading to substantial profits for credit institutions.
At the same time, a discount model linked to the credit growth indicators of financial institutions is being developed. The rebate could amount to 100% of the contribution payable if the credit institution experiences a substantial increase in its lending volumes.
With the introduction of a solidarity contribution, a budget revenue increase of EUR 96 million is planned for 2025. Additionally, the solidarity contributions made by credit institutions will be extended for two more years.
The regulation was initially developed by the Ministry of Finance in consultation with representatives of the Bank of Latvia and the Ministry of Economy. Regulatory consultations are also conducted with the Financial Industry Association.
This issue is set to be addressed during the extraordinary meeting of the Cabinet of Ministers on 19 September 2024.
