Debate on bank solidarity levy extension ongoing – Lithuanian PM

VILNIUS – The debate on the extension of the exiting temporary bank solidarity levy in Lithuania, which will expire next year, is not over yet, Prime Minister Ingrida Simonyte says, adding that the Bank of Lithuania is being consulted on the matter.

Its extension will depend on how much revenue the state could raise from the levy, she said.

"I cannot say that the discussion is over because it all depends on the tax base and whether we have a tax base or we don't have a tax base. (...) We are still discussing with the Bank of Lithuania whether we should have a tax base (...) from that contribution in 2025," Simonyte told the vz.lt business news website on Thursday.  "I'm not saying the issue is completely closed, but it is not a source for seven or ten years, whatever way we look at it."

According to the prime minister, banks' performance will also depend on how markets will react to future decisions by the European Central Bank. 

As the Bank of Lithuania expects banks to pay 220 million euros in the temporary solidarity levy this year, the bank's board member Simonas Krepsta said earlier that the central bank saw no need to propose extending the levy, adding that this year will be "exceptionally profitable year for the banking sector".

Vilija Blinkeviciute, chair of the opposition Lithuanian Social Democratic Party, has proposed extending the temporary solidarity levy.

Introduced in 2023, this levy is calculated on net interest income exceeding bank's average income of the last four years by more than 50 percent. The levy was introduced after banks in Lithuania started recording huge profits from the ECB's rapidly increased interest rates.

Banks have paid more than 250 million euros in solidarity levy contributions for 2023 and are estimated to pay around 220 million euros for 2024.