Taxation of Bank Windfall Profits in the Baltics

Milda Valentinaite, Egle Ceponyte and Ingars Zustrups

No 86, European Economy - Economic Briefs from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The shift in monetary policy has different repercussions on bank profits depending on the prevalence of fixed or floating interest rates charged on loans. The Baltic states provide a case study of the impact of monetary tightening on profits in predominantly floating interest rates setup amid high liquidity. This paper examines the drivers of the profit surge following 2022-2023 tightening cycle, reviews the fiscal policy responses chosen by Lithuania, Latvia and Estonia, and draws tentative lessons on the design and effectiveness of sector-specific windfall taxation.

Keywords: Monetary policy; Interest rates; Fiscal policy; fiscal rules; inflation; Baltic countries. (search for similar items in EconPapers)
JEL-codes: E43 G21 H25 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecobri:086

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