On Dec. 12, LAT CB reduced capital requirements for real estate lending.
LAT CB abolished increased risk level applied to credit institutions for transactions secured by mortgages relating to commercial real estate located in Republic of Latvia.
Applies to credit institutions registered in LAT/EU Member states that calculate capital requirement for Latvian commercial real estate exposures with standardized approach.
The adopted administrative act repeals the administrative act issued in 2023, which initiated a gradual reduction in the high-risk level, initially setting it at 80% from Jun, 30, 2024 (reducing it from the 100% level that had been in effect since 2007).
By repealing this previously issued administrative act, the application of increased requirements to such risk transactions in Latvia is also abolished as of Jan. 1, 2025.
Will now be subject only to requirements set out in EU Reg on prudential requirements for credit institutions harmonised at EU level, including the minimum risk level of 60%.
Increased risk rating is removed, given that the credit quality of LAT commercial real estate exposures in credit institutions' portfolios has gradually improved since 2007.
The decline in interest rates and other factors have led to more favorable real estate market conditions over the past year, although uncertainty in the sector remains high.
