Lithuanian central bank raises capital requirement, adds €60 million reserve

The Board of the Bank of Lithuania approved a new capital requirement that will enable banks to build an additional €60 million in capital reserves, representing less than 6 % of the sector’s profit from the previous year. The increase of 0.25 percentage points is expected to have minimal impact on loan availability or pricing, with the average borrowing cost potentially rising by only 0.04 percentage points and credit growth slowing by up to 0.4 percentage points.

Board member Marius Skuodis said the measure is preventative, accumulating reserves while the economy is expanding so that banks can continue financing households and businesses if future economic shocks occur. The central bank noted a favorable macro‑economic environment, strong bank profitability and a transition of the cyclical risk level from low to medium. Household‑sector risk remains high due to overvalued housing prices and vigorous mortgage borrowing, while corporate‑sector risk stays low. The Bank of Lithuania reviews the anticyclical capital reserve norm quarterly, with the current 1 % rate in place since October 2023.