Eurosystem and ECB

European Central Bank

We actively take part in the activities of the European Central Bank (ECB), an institution that governs the euro area’s central banking system and is responsible for shaping and implementing monetary policy in the euro area. The main objective of the ECB is to maintain price stability in the euro area over the medium term. Detailed information on the activities of the ECB is available on the ECB website, where you can also find ECB press releases, Governing Council decisions, opinions, electronic publications, statistical data and other useful information.

European System of Central Banks

Together with the ECB and all national central banks of the EU Member States, we form the European System of Central Banks (ESCB).

Eurosystem

We are also part of the Eurosystem, comprised of the ECB and the national central banks of the Member States sharing the single currency. When joining the euro area, Lithuania also became part of the banking union’s Single Supervisory Mechanism. The ECB became responsible for direct supervision of the three major banks registered in Lithuania – AB SEB bankas, Swedbank, AB, and AB Šiaulių bankas.

The primary objective of the ESCB is to maintain price stability.

The main tasks of the ESCB are to:

• define and implement EU monetary policy;
• conduct foreign exchange operations in line with the provisions of the Treaty on the Functioning of the European Union;
• hold and manage the official foreign currency reserves of the Member States;
• promote smooth operation of payment systems.

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Decision-making process

The ECB implements ESCB tasks on its own or together with national central banks. The decision-making bodies include:

• The Governing Council, which formulates monetary policy for the euro area. The ECB Governing Council consists of the Executive Board and the governors of the national central banks of the euro area countries. The Governing Council meets, as a rule, twice a month at the ECB’s premises in Frankfurt am Main, Germany. The Chair of the Board of the Bank of Lithuania has been involved in the activities of the ECB Governing Council since 1 January 2015.
• The Executive Board, which implements monetary policy for the euro area in accordance with the decisions taken by the Governing Council. It consists of the President of the ECB, the Vice-President and four other members, appointed for eight years by the heads of the government of the euro area countries.
• The General Council – a decision-making body of the ECB – which will be dissolved once all EU Member States have introduced the single currency. The Chair of the Board of the Bank of Lithuania has been participating in the activities of the ECB General Council since the start of Lithuania’s EU membership.

Eurosystem and ESCB committees

We take part in the activities of Eurosystem and ESCB committees and more than 90 different structures (working, expert, task groups, research and conferences), thus contributing to the ECB decision-making process.

ECB capital

The Bank of Lithuania is a holder of the ECB capital. The national central banks of the euro area member states hold 70% of the total ECB capital, while the remaining 30% is shared by the national central banks of the non-euro area member states. The Bank of Lithuania’s share in the subscribed ECB capital is 0.4707%, amounting to €50.95 million. The share depends on the country’s total population and gross domestic product. These weights are adjusted every five years or whenever a new Member State joins the EU.

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Banking union

The banking union is an EU-level banking supervision and resolution system which aims to ensure that the banking sector in the region is safe and reliable and that non-viable banks are resolved without recourse to taxpayers’ money. The banking union members are all euro area countries and those EU Member States that choose to participate. The banking union is comprised of three main building blocks:

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I. Single rulebook

The single rulebook consists of a set of legislative texts that are applied to all EU financial institutions. It includes capital requirements for banks and measures for the prevention and management of bank failures. The pillars of the single rulebook are:

• Capital Requirements Directive IV (CRD IV) and Capital Requirements Regulation (CRR);
• Directive on deposit guarantee schemes (DGS);
• Bank Recovery and Resolution Directive (BRRD).

II. Single Supervisory Mechanism

The Single Supervisory Mechanism is an EU-level system for prudential supervision of banks, composed of the ECB and the national supervisory authorities of the participating Member States.

After becoming a member of the euro area, Lithuania also joined the banking union’s Single Supervisory Mechanism. Since then, the ECB became responsible for direct supervision of the three major banks registered in Lithuania. It performs their supervision jointly with the Bank of Lithuania.

Learn more about the system of banking supervision in Europe, its key objectives and features on the website dedicated to banking supervision.

The Bank of Lithuania and the Single Supervisory Mechanism. A member of the Board of the Bank of Lithuania participates in the activities of the Supervisory Board, which usually meets twice a month. The Board discusses various issues related to banks supervised directly by the ECB.

III. Single Resolution Mechanism

The third block of the banking union is the Single Resolution Fund, which aims to ensure an orderly resolution of failing banks with minimal costs to taxpayers and the real economy.

The Single Resolution Mechanism consists of:

• the Single Resolution Board, an EU-level resolution authority, which is the main decision-making body in the Single Resolution Mechanism;
• the Single Resolution Fund, financed by the banking sector, which is a fund established at the supranational level.

In carrying out centralised bank resolution of countries involved in the Single Supervisory Mechanism, the Single Resolution Board closely cooperates with national resolution authorities (in the case of Lithuania – the Bank of Lithuania).

Learn more about the system of banking supervision in Europe, its key objectives and features on the Single Resolution Board website.

The Bank of Lithuania and the Single Resolution Board. The national resolution authority in Lithuania is the Bank of Lithuania, which participates in the activities of the Single Resolution Board. It is represented by a member of the Board of the Bank of Lithuania.

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