Latvia Stability Programme Report

WELL CAPITALISED AND LIQUID BANKING SECTOR The Latvian banking sector is well capitalized, liquid and profitable, with a high presence of large Nordic and Baltic banking groups Key Highlights The Latvian banking sector is dominated by subsidiaries and branches of banks from the European Economic Area, mostly from Nordic countries. Since 4Q 2021 Swedbank Baltics AS has been a parent of Swedbank subsidiary banks in Estonia, Latvia, and Lithuania, creating a Baltic sub-consolidation group, which is under the supervision of the European Central Bank. Swedbank Baltics AS is a financial holding company, fully owned by Swedbank AB in Sweden. Latvia is a part of the European Banking Union, and the three largest banks are directly supervised by the ECB and are under the remit of the SRB Direct exposure to RU, BY and UA is low at the aggregate level and limited to a few smaller banks. Overall, these exposures have decreased significantly since 2015 without major systemic shocks to the financial system and economy. Capital Adequacy (%) Capital Ownership of the Banking System (20 27% 11% Source: Bank of Latvia 2022) 62% Domestic✶ ■ Nordic ■Other * Swedbank currently belongs to a holding registered in Latvia, accordingly, the direct owner is in Latvia. Liquidity Coverage Ratio 400% 350% 300% 250% 200% 150% 100% 50% 0% 2016 2017 2018 2019 2020 2021 2022 64208642086420 18 16 14 12 10 Total capital ratio -CET1 ratio Minimum requirement for total capital ratio (8%) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 2020 2021 2022 Average LCR, LV 2019 Average LCR, EU Minumum requirement Source: FCMC | Note: Tier 1 ratio matches CET 1 ratio. The minimum TCR requirement is the Source: FCMC, EBA regulatory minimum and doesn't include capital buffer requirements and supervisory Pillar 2 requirements. 15

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