Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28


During the Global Financial Crisis (GFC), Latvian authorities raised the country’s deposit-insurance cap from EUR 20,000 to EUR 50,000 (USD 26,800 to USD 67,000) in response to international calls to bolster deposit-insurance systems. They passed the measure on October 16, 2008, and it came into effect two days later. The Financial and Capital Market Commission (FCMC), Latvia’s prudential supervisor and existing deposit administrator, oversaw the guarantee. The FCMC covered most types of deposit accounts and insured all Latvian-registered deposit-taking institutions, including some foreign-bank branches operating in Latvia. The FCMC charged quarterly premiums on insured accounts and could levy additional fees if necessary. Following an IMF-Latvian Stand-By Arrangement (SBA) and a European Union (EU) directive, the Latvian government further amended its deposit-guarantee system in 2009 and 2010, reducing the payout time and increasing the insured amount to EUR 100,000. No bank failures occurred until 2011, when JSC Latvijas Krājbanka, Latvia’s sixth-largest deposit taker, failed. The FCMC paid out 335.6 million Latvian lati (LVL; USD 645.4 million) to 220,000 depositors. The FCMC required a government loan to make these payouts, as the Deposit Guarantee Fund (DGF) had only LVL 149.9 million in assets.

Date Revised