The €1 million bank licence in Latvia
The specialised credit institution, explained.
Latvia now licenses banks at €1 million of initial capital instead of €5 million. For founders, the step from an e-money or payment institution to a deposit-taking bank just became fundable.
What changed on 6 January 2026
Amendments to the Credit Institution Law, adopted on 11 December 2025 and in force since 6 January 2026, created the specialised credit institution: a bank in every legal sense, with a lower entry threshold for three kinds of business model.
Latvia went more than ten years without licensing a new bank until AS INDEXO Banka in May 2024, and the sector is still concentrated among a few incumbents. The stated aim of the amendment is more competition and better access to financial services across the country.
Interest was immediate, with several firms in consultations with the regulator within the first quarter of 2026. No specialised credit institution has been licensed yet. The first one will set the benchmark, and it will be the file that was built properly, not the one filed first.
What is a specialised credit institution?
A bank with one condition attached. Under Section 1(1)(73) of the Credit Institution Law, it provides the financial services listed in Section 1(1)(4) and meets at least one of three criteria:
- Limited customer base. Defined on a territorial, employment or common-interest basis, in the sense of the Law on Savings and Loan Associations.
- Digital only. Financial services provided exclusively through digital channels.
- Innovative model. A financial service that is new, or significantly improved, on the Latvian market.
Section 21(1) then sets initial capital at not less than €1 million. Amendments in force since 9 June 2026, implementing CRD VI, leave those provisions untouched but restate the fit-and-proper rules and the passporting deadlines.
Everything else, from fit-and-proper to capital adequacy to AML, applies exactly as it does to a €5 million bank. "Small" describes the entry ticket, not the supervision.
Three consequences
- The services list is the full one. Deposits, lending, leasing, payment services, FX and securities dealing, investment services, guarantees, safekeeping, e-money and, with a MiCA permission, crypto-asset services. What you may actually offer is fixed by your business plan and by any conditions written into the licence.
- The ECB grants it. Latvia is in the Banking Union. Latvijas Banka assesses the file and submits a draft proposal; the European Central Bank takes the decision.
- It passports. Services in another EEA state are decided within one month of notification to Latvijas Banka; a branch within three months.
Specialised bank, standard bank or EMI
| Specialised credit institution | Standard credit institution | E-money institution | |
|---|---|---|---|
| Initial capital | €1,000,000 | €5,000,000 | €350,000 |
| Deposits from the public | Yes | Yes | No |
| Lending in own name | Yes | Yes | Only ancillary to payments |
| Entry condition | One of three criteria | None | None |
| Assessed by | Latvijas Banka | Latvijas Banka | Latvijas Banka |
| Granted by | ECB | ECB | Latvijas Banka |
| EEA passport | Yes | Yes | Yes |
| Application fee | None | None | €5,000 |
Requirements: capital, exit strategy, people, substance
- Capital. €1 million is the floor, not the budget. Following the EBA's assessment methodology, estimate own-funds requirements for at least three years, add the expected losses of the first three years to the €1 million, and hold the higher of the two. Capital is paid in cash into a temporary account at Latvijas Banka before the application is examined. The bank must be a joint-stock company (AS); an SIA will not do.
- Exit strategy. The one document a €5 million bank does not submit. Licensing Regulation No 259, point 5.1, requires a plan for winding down while meeting every obligation to depositors. Show, with numbers, how depositors are repaid if the model does not work.
- People. Board members and key function holders (risk, compliance, internal audit, CFO, AML officer) need relevant education, at least three years' experience and an impeccable reputation. Shareholders at 10% or more go through the qualifying-holding assessment: reputation, source of funds and capacity to add capital later.
- Substance. The bank is expected to be managed from Riga. The application needs outlines of some two dozen policies, from risk and liquidity to AML/CTF and IT architecture. Approved, working versions must exist before the first customer.
Two rules for every policy we draft: it is written to be operated, not to restate the law, and the AML risk assessment matches the business plan line by line.
Who should apply
- An EMI or payment institution that has outgrown its licence. Safeguarded client funds cannot be lent. Deposits can.
- A non-bank lender that wants deposit funding. Cheaper than wholesale lines, provided the model is digital only or demonstrably innovative in Latvia.
- A non-EU fintech or banking group that needs an EEA passport. One entity in Riga, inside the Single Supervisory Mechanism, at a fifth of the usual initial capital.
- A crypto-asset business combining MiCA and banking. Possible under the services list. Expect the AML scrutiny to match.
It is not for everyone. If you only need to move money, an e-money licence is faster and cheaper. If you need branches and the general public, you are a standard bank. And if capital or reputation is the weak point, no licence category helps.
The licensing process, step by step
The ordinary credit institution process, run jointly with the ECB. No regulator fees at any stage.
- 01
Introductory meeting
Is the business viable, and should the process continue? The company need not exist yet. Bring the shareholders, officials, capital and a draft business plan.
- 02
Pre-licensing
Business plan, shareholders, capital and management are reviewed and gaps named. Free, with no deadline. The regulator names gaps but will not fix the documents for you.
- 03
Readiness check
Latvijas Banka reviews whether the basic documentation is ready to file. The ECB may join, and its view of completeness can differ.
- 04
Formal application
The full file. Completeness is checked within one month and a project manager is assigned.
- 05
Assessment
Latvijas Banka and the ECB assess the substance together. Three months from a complete file, and no more than twelve from the application. The regulator wants the founders in the room.
- 06
Decision
A draft proposal goes to the ECB, which decides. Capital is transferred and operations start under the approved plan.
Timeline and costs
Plan on roughly a year from the introductory meeting to a decision, and run the capital raise, hiring and IT build in parallel. The most common mistake is a launch date set before the ECB's involvement was priced in.
Latvijas Banka works in English and accepts application documents in English; the articles of association and registered governing documents are in Latvian.
There is no application or assessment fee. After authorisation the bank pays a supervisory fee of up to 0.033% of average quarterly assets. The real costs are capital, people and the platform.
After the licence
- Start within twelve months. A licence can be cancelled if operations do not begin within a year, or stop for more than six months.
- A curator, and reporting. Changes to officials, shareholders, services or any licensing document must be notified.
- Deposit guarantee. The bank participates in Latvia's deposit guarantee scheme like any other bank.
- Growing out of "specialised". There is no upgrade step, but leaving the criterion you were licensed on is a material change. Raise it with the curator before, not after.
Where applications go wrong
| What goes wrong | What it looks like |
|---|---|
| Unrealistic timeframe | A launch date set before the ECB was priced in |
| Over-optimistic projections | Volumes the market study does not support |
| Thin market analysis | No credible estimate of the niche |
| IT under-forecast | Platform costs that do not survive year two |
| Optimistic exit strategy | A wind-down that assumes a buyer appears |
| Detached AML assessment | A generic risk assessment on a specific product |
| Policies that restate the law | Documents nobody could operate from |
| Reputation gaps | Undisclosed activity or measures abroad |
A licensing file describes a bank that already exists on paper. If the plan, the risk assessment, the policies and the people were each written by a different adviser, the reviewer will notice in the first meeting.
How Nordant helps
Same regulator, same process as the payment, e-money and crypto files we work on, with the ECB added and the stakes raised.
- Licensing & Authorisation. Scope, build and defend the file until the ECB decides.→
- Regulatory Advisory. Bank or EMI? Which criterion do you meet, and can you evidence it?→
- Legal & Corporate Advisory. The AS, shareholder agreements, group structure and Latvian governing documents.→
- Outsourced Legal Counsel. Senior capacity for the year a bank build takes.→
- Outsourced Compliance & MLRO. An AML risk assessment that matches your product, and policies written to be operated.→
Our default answer is "yes, safely." On a bank licence that sometimes means telling you in the first call that the capital or the team is not there yet, and what it would take.
Common questions
- What is the minimum capital for a banking licence in Latvia?
- €5 million for a standard credit institution and €1 million for a specialised credit institution that meets one of three criteria: a limited customer base, digital-only services or an innovative business model. In practice, hold the higher of three years of own-funds requirements or €1 million plus three years of projected losses.
- Who grants the licence?
- The European Central Bank, on a proposal from Latvijas Banka. Ongoing supervision is by Latvijas Banka within the Single Supervisory Mechanism.
- Can a specialised credit institution take deposits and lend?
- Yes. It is a credit institution with access to the full list of financial services, and a member of Latvia's deposit guarantee scheme.
- Is it supervised more lightly than a bank?
- No. Requirements and process are identical. The differences are the €1 million capital, the entry criteria and a wind-down plan in the file.
- How long does it take?
- Three months from a complete application and no more than twelve from filing. Including pre-licensing and the ECB review, plan on roughly a year.
- What does it cost?
- No application fee. After authorisation, a supervisory fee of up to 0.033% of average quarterly assets. The real costs are capital, people and the platform.
- Does the bank have to be based in Latvia?
- Yes. A Latvian joint-stock company (AS), managed from Latvia, with capital paid into an account at Latvijas Banka before the application is examined.
Figures reflect the position at publication. We confirm the current rules for your case in the scoping call.