Lithuanian commercial banks and other credit institutions are expected to transfer a total of over 50 million euros this week as the first payment of the so-called temporary solidarity levy, the central bank said on Tuesday.
Simonas Krėpšta, a board member at the Bank of Lithuania, says that in light of “the unexpected and rapid increase in profits of some banks due to exceptional circumstances” the central bank has “proposed a package of measures on how the country’s banks could contribute to public needs without negatively impacting financial stability”.
“We can see that these measures are proving effective: banks are making a significant solidarity contribution to the country’s defence financing,” he said in a press release.
Banks have until August 31 to make the advance payment, with the full tax for the year 2023 to be paid by June 15, 2024.
The tax is calculated based on net interest income that exceeds the average income of the past four years by more than 50 percent.
Due to interest rate hikes by the ECB, banks in Lithuania are looking to post over a billion euros in combined profits this year. The temporary windfall profits tax was proposed to redress that.
The government said the proceeds would be used for defence, military and civilian transport infrastructure.
The levy is expected to raise a total of around 400 million euros over two years.
The banking sector’s combined net profits surged to 258.4 million euros in the first quarter of 2023, from almost 100 million euros a year ago.
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