Although more than half a year remains for the Bank of Lithuania's stricter requirements for credit institutions providing housing loans to come into force , there is concern whether conditions for market participants will be equal. For the most part, it seems, no significant changes are to be expected.
The Board of the Bank of Lithuania officially implemented its earlier intention to apply an additional capital buffer of 2% to housing loan portfolios of credit issuers, in order to cool down the heating housing market and reduce financial stability risks. As of 1 July 2022, this requirement will be applied to credit institutions with the housing loan portfolio exceeding €50 million. Currently, there are five such institutions.
In a comment for business daily Verslo Žinios, I noted that the additional requirement for credit institutions means that they will have to set aside more capital, and thus will not be able to use these funds for operations. It may also be the case that institutions may have to raise additional capital, for example through additional shareholder contributions or without paying planned dividends.
Currently SEB, Swedbank and Šiaulių bankas are considered to be institutions of systemic importance, to which Bank of Lithuania also applies the sectoral systemic risk reserve requirement. Thus, the situation of SEB and Swedbank will not change - the previously applied maximum required capital reserve of 2% will remain in force. The reserve will increase for Šiaulių bankas and two credit unions. Finally, the Estonian regulator also applies a 2% reserve for Luminor, likewise is the case with Citadele in Latvia, so no market participant seems to gain an exclusive competitive advantage.
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