Bank of Lithuania

Authorisation of Payment Istitutions

The aim of this Guide is to introduce persons concerned to the authorisation process for payment institutions conducted by the Bank of Lithuania, requirements for payment institutions being established (legal persons not yet established) or being authorised (already established legal persons), set out the approach of the Bank of Lithuania to new market participants, set out a list of the documents to be submitted with an application for authorisation, and to identify other major aspects of authorisation.

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Licence of a Payment Institution

The complete list of payment services is presented in Article 5 of the Republic of Lithuania Law on Payments:

1) services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;
2) services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;
3) execution of payment transactions, including transfers of funds on a payment account with the payment service provider of the payment service user or with another payment service provider: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders;
4) execution of payment transactions where the funds are covered by a credit line for a payment service user: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders;
5) issuing of payment instruments and/or acquiring of payment transactions;
6) money remittances;
7) payment initiation services;
8) account information services.

In order to provide these services, holding a payment institution licence is necessary (or other licences, e.g. that of a bank, electronic money institution).

A payment institution wishing to provide only account information services must hold a licence of a payment institution providing only account information services.

Please note that the Law on Payments does not entitle a payment institution to withhold the funds of a client for a relatively longer time than necessary for the execution of a payment transaction; therefore, for clients to be able to hold funds in payment cards or other technical instruments such as an ‘e-wallet’, a payment institution licence is not sufficient (in such a case, an electronic money institution or bank licence is necessary). Here (35 KB ) you can find the Position of the Supervision Service of the Bank of Lithuania with respect to funds held in payment accounts. 


Licence of a payment institution to engage in restricted activities

In order to create a favourable environment for Lithuanian and foreign start-ups, a special project for a payment institution licence to engage in restricted activities, based on the ‘sand-box’ principle, was implemented. The aim of it was to facilitate access of new market participants to the Lithuanian market and later, after being granted a licence, to engage in unrestricted activities, to the European Economic Area market as well. The basic difference between a payment institution engaged in restricted activities and a payment institution is that the payment institution engaged in restricted activities is not subject to the minimum initial capital requirement; however, a licence of a payment institution to engage in restricted activities is valid solely in the Republic of Lithuania; in addition, an MI holding this licence has the right to provide only the payment services specified in Article 5(1-5) of the Law on Payments.


The requirement for the minimum initial capital of a payment institution

The initial capital of a payment institution must at all times be no less than the larger of the following amounts:

  • no less than EUR 20,000 where the payment institution intends to provide only money transfer services; 
  • no less than EUR 50,000 where the payment institution intends to execute only payment initiation services; 
  • no less than EUR 125,000 where the payment institution intends to provide: 
  1. services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account; 
  2. services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account; 
  3. payment transactions, including transfers of funds on a payment account with the institution of the payment service provider of a payment service user or with the institution of another payment service provider: execution of direct debits, , execution of payment transactions through a payment card or a similar device and/or execution of credit transfers, including standing orders; 
  4. payment transactions where the funds are covered by a credit line for a payment service user: execution of direct debits, including one-off direct debits, execution of payment transactions through a payment card or a similar device and/or credit transfers, including standing orders; 
  5. issuing of payment instruments and/or acquiring of payment transactions.

Authorisation process

The approach of the Bank of Lithuania to the authorisation process for payment institutions, as well as for other institutions, is, as far as possible, an open one and normally begins well before an application for an authorisation is submitted to it. We encourage all applicants who actively seek a payment institution licence to contact us as early as possible so that we could discuss their planning process and help determine financial servisces that have to be licensed. This allows us to be clearer in explaining the authorisation process and its meaning, our requests, requirements, expectations and all other major aspects that may affect the authorisation process.

The following basic stages in the authorisation process can be singled out:

  • submission of an application for a licence of a payment institution to the Supervision Service of the Bank of Lithuania (hereinafter ‘Supervision Service’): the Supervision Service, within 5 business days, reviews whether all necessary documents have been submitted and, where no formal deficiencies are identified, accepts the application for consideration;
  • assessment of an application for a licence of a payment institution and attached documents: where the documents submitted have no deficiencies, the licence is issued within the shortest possible 3-month term. Nevertheless, our experience shows that submitted documents in only exceptional cases do not contain deficiencies of some sort; therefore, the Supervision Service usually submits comments to the applicant for a payment institution licence, asking to submit additional information or documents. In such a case, the time limit for assessment is extended;
  • issuance of a licence or refusal to issue a licence: after finishing assessment of submitted documents, the Board of the Bank of Lithuania analyses summary information submitted by the Supervision Service and takes a decision regarding the issuance of a licence or refusal to issue it.

Statutory timeframe

The laws provide that an application for a payment institution licence and application for a licence of a payment institution providing only account information services must be assessed within: 1) 3 months of submission of proper and sufficiently informative documents; 2) where not all documents have been submitted or have been submitted with deficiencies, within 3 months of submission of the documents and information required additionally by the Supervision Service.

The payment institution licence for restricted activities is subject to a shorter – 2 month – period; upon submission of additional documents or information, the term is extended for 2 months.


Initial meeting with representatives of the Bank of Lithuania

The Bank of Lithuania, knowing that the legal acts regulating the authorisation process may not always be clear for both newcomers to the financial sector and experienced specialists, encourages applicants for a payment institution licence to contact the Bank of Lithuania at an early stage. The Bank will provide more detailed information about the authorisation process and the requirements for prospective (existing) payment institutions.

The representatives of firms who participated in pre-application meetings with representatives of the Bank of Lithuania more than once emphasised the benefits of such meetings, as they not only helped get the answers to the questions that arose, but also enter into a direct contact with specialists of the Bank of Lithuania. The aim of the initial meeting is to answer any questions that might have arisen in the pre-application stage and find out what licensed financial services the applicant is planning to provide or what type of licence it should seek. The attendees of such meetings typically include at least two specialists from the Supervision Service of the Bank of Lithuania (who typically answer questions about the authorisation process); however, any other, e.g. technical specialists may be required to attend as well.

During the pre-application meeting, the Bank of Lithuania aims at discussing the following:

  • Who the applicant is and what kind of entity it will be?
  • Who are (will be) the shareholders, holders of voting rights and investors of the prospective payment institution and what is their country of origin?
  • How advanced or developed is the applicant’s proposition? In some cases it may be too early to have a meeting.
  • Is the applicant part of a larger group?
  • Who will be responsible for running the business?
  • Summary of the applicant’s operating plan.
  • Details of the products/services, target markets, delivery channels, pricing policy, and the corresponding regulated activities that will be applied for.
  • Funding sources of the payment institution.
  • Anticipated staffing levels.
  • Key outsourcing arrangements.

It is our view that the process works well if the above information is provided to us in the form of a presentation ahead of the first meeting. We therefore urge prospective applicants to answer all the above questions before the anticipated meeting, to be able to talk in detail in this regard.


Payment institution licence fee

Prior to applying for a payment institution licence, it is necessary to pay into the account of the State Tax Inspectorate (STI) a state levy for the granting of the licence, which currently is EUR 898 (the sizes of levies are established by Resolution No 1458 of the Government of the Republic of Lithuania of 15 December 20001). The payment institution licence to engage in restricted activities is currently subject to a smaller levy (EUR 682). For payment institutions providing only account information services, the licence fee is EUR 693.

The procedure for the generation in the online banking system of banking orders to the income collection accounts of the STI  and the numbers of the income collection accounts are available on the STI website.

 

1 Available only in Lithuanian.


Key requirements for a payment institution being established or authorised

Taking into account that, at the time of authorisation, the payment institution being established or authorised must be prepared to comply with all requirements set for it, as a payment institution in operation, the Bank of Lithuania requests that detailed data is submitted already at the time of application. Nevertheless, when assessing critical aspects that may determine banking authorisation, the following basic elements can be singled out:

  • fitness of submitted documents: the documents submitted must comply with the requirements of the legal acts regulating the activities of payment institutions and their supervision; all correct data established in legal acts or requested additionally must be submitted;
  • compliance with the minimum capital requirement for a payment institution: according to the provisions of the Republic of Lithuania Law on Payment Institutions, the minimum capital requirement for a payment institution, subject to the services provided, shall not be less than EUR 20,000, EUR 50,000 or EUR 125,000, while payment institutions engaged in restricted activities are not subject to this requirement. Please note that the average amount of payment transactions executed over the last 12 months by payment institutions, including intermediaries for which they assume full responsibility (if no activities are carried out, planned in the business plan) shall not exceed EUR 3,000,000 per month except in the case provided for in Chapter 6 of the Law on Payments;
  • fitness and propriety of the payment institution and its shareholders or holders of voting rights: entities with a qualifying holding in the payment institution’s authorised capital and/or voting rights must be able to ensure sound and prudent management of the payment institution, have good repute and be financially sound (the licence of a payment institution to engage in restricted activities in not subject to the requirements for the fitness and propriety of shareholders or holders of voting rights);
  • fitness and propriety of heads of a payment institution: the heads of a payment institution must be of good repute and possess the qualification and experience necessary to properly perform their duties.
  • the planned business plan must correspond to the possibilities of the payment institution’s founders (shareholders or holders of voting rights) to implement it, while the prospective payment institution must, at the time of authorisation, be prepared to provide financial services in a safe and sound manner.

Payment institutions providing payment initiation or account information services must be covered by professional indemnity insurance.

It should be noted that, given the need to ensure sound and prudent management of the payment institution, the payment institution must have a detailed procedure for the management of the electronic money issuance activity, adequate to the nature, scope and complexity of the payment institution’s activities, including an organisational structure allowing to ensure the differentiation of functions and vertical as well as horizontal responsibilities with clearly defined, transparent and consistent limits of responsibility, a system for the identification, management, monitoring of risk which arose or may arise, a management information and internal control system, including reliable administrative measures and an accounting system.


Assessment of submitted documents

The process usually involves verification and assessment by a number of specialists from the Supervision Service and other structural units of the Bank of Lithuania.  They present a common opinion and conclusions regarding authorisation. During the assessment period, the following processes are also carried out:

  • regular communication and meetings with representatives of the applicant firm (when required);
  • submission of comments by the Supervision Service, according to which the payment institution must eliminate established material deficiencies. Upon request for additional information or data, the decision must be taken within 3 months of the receipt of the additional documents and data (for the licence of a payment institution for restricted activities – 2 months).

The duration and level of scrutiny of documents is subject to the volume of activities the applicant plans to undertake, specified in the operating plan. Where the application for a licence of a payment institution is requested not for all services that can be provided under the payment institution licence, the scope of provided documents should be smaller; hence, the assessment could be faster.

All applicants for a licence of a payment institution have direct access to Bank of Lithuania specialists, who are experts in assessing submitted documents. We are on hand to take applicants through the authorisation process, inform about the progress of the process, and aim to ensure a cooperation-based relationship between the Bank of Lithuania and financial market participants during both the authorisation process and after it.


Documents and information to be submitted to the Bank of Lithuania in order to be granted a payment institution licence

In order to receive a payment institution licence, the company must submit to the Bank of Lithuania an application form and documents specified therein (Annex 2 to the Rules on the Licensing of Electronic Money and Payment Institutions).
In order to receive a licence of a payment institution providing only account information services, the company must submit to the Bank of Lithuania an application form and documents specified therein (Annex 5 to the Rules on the Licensing of Electronic Money and Payment Institutions).


Documents and information to be submitted to the Bank of Lithuania in order to be granted a licence of a payment institution to engage in restricted activities

In order to receive a licence of a payment institution to engage in restricted activities, the company must submit to the Bank of Lithuania an application form and documents specified therein (Annex 4 to the Rules on the Licensing of Electronic Money and Payment Institutions).


Laws and legal acts regulating the activities and authorisation of payment institutions

 

2 – Lithuanian consolidated version valid as of 1 March–30 June 2017. English version last amended on 12 March 2015.

3 – Lithuanian consolidated version valid as of 1 November 2016. English version last amended on 14 October 2014.

4 – Lithuanian consolidated version valid as of 1 August 2018. English version last amended on 20 August 2018.

5 – Lithuanian consolidated version valid as of 1 August 2018. English version last amended on 20 August 2018.

6 – Lithuanian consolidated version valid as of 1 March 2017. English version last amended on 4 December 2015.

7 – Lithuanian consolidated version valid as of 1 December 2016. English version last amended on 17 January 2008.

8 – Lithuanian consolidated version valid as of 7 March 2012. English version last amended on 24 December 2009.

9 –Lithuanian consolidated version valid as of 30 July 2019. English version last amended on 28 August 2019.

 

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Last update: 28-08-2019