2012-01-12
Report on the inspection of AB Bank Finasta discussed
The Board of the Bank of Lithuania discussed the report on the inspection of AB bank Finasta conducted by the Bank of Lithuania. The inspection focussed on individual issues in relation to the Bank’s management and internal control, credit and liquidity risk management; interest was taken in the internal capital adequacy assessment process. A significant event which has had an impact of the Bank’s operation – bankruptcy of its indirect shareholder AB bankas SNORAS was taken note of. At the same time it was noted that at that time the operation of bank Finasta remained stable, the Bank observed the established risk ratios.
AB bank Finasta was instructed to eliminate the deficiencies related to its risk management systems and other shortcomings in its operation established during the inspection and the supervisory review and evaluation by 31 March 2012. The Bank’s Head of Administration was instructed to arrive to the Bank of Lithuania to explain how the Bank was going to remove the identified deficiencies in its operation and, after the expiry of the fixed term, to advise of how this had been done.
Legal conditions for the start of operation of electronic money institutions provided
After coming into force of the Law on Electronic Money and Electronic Money Institutions as from this year, the Bank of Lithuania will issue licences, permits, agreements to them, and will perform other actions. The Board of the Bank of Lithuania adopted three resolutions which provide legal conditions for the start of operation of such institutions.
The way an application shall be filed and processed, and a permit for the operation of an electronic money institution shall be issued, the way electronic money institutions shall calculate their own funds were established; instructions for electronic money institutions were formed in order to prevent from money laundering and/or terrorist financing.
The Board decided that electronic money institutions, as credit and payment institutions, would be subject to the requirements of the Regulations for Filing General Applications by Credit and Payment Institutions for the Issuance, Processing and Granting of Permits.
Pursuant to the Rules for the Calculation of the Own Funds of Electronic Money and Payment Institutions approved by the Board, the provisions regulating the calculation of own funds applicable to electronic money institutions are basically no different from those for the calculation of the own funds of payment institutions laid down in the legal acts of the European Union.
The Rules establish the composition of the own funds of an electronic money and payment institution (Tier I and Tier II capital), limits on capital, deductions from capital, regulate the four methods for the calculation of own capital requirement, provide for the types of reports to be submitted for supervisory purposes. The own capital requirement of an electronic money institution meant for the issuance of electronic money shall account for at least 2 per cent of the average of unpaid electronic money.
By a resolution of the Board of the Bank of Lithuania, electronic money institutions will be subject to the same requirements for the prevention of money laundering/terrorist financing as credit institutions. Taking into account the provision laid down in Item 6 of Paragraph 1 of Article 10 of the Law on Money Laundering and Terrorist Financing, the instructions have established the largest amount to be held on electronic media (EUR 250 or its equivalent in another foreign currency).
Before entering into force of the Law on Electronic Money and Electronic Money Institutions, the right to issue electronic money had been vested in commercial and specialised banks, and the Lithuanian Central Credit Union. Whereas now, no specialised banks need to be established for this purpose; electronic money may be issued by electronic money institutions holding a licence of an electronic money institution (they have been subject to a minimum capital requirement of at least EUR 350 thousand, the licence of an electronic money institution is valid in also other member states) and by electronic money institutions holding a limited operation licence of an electronic money institution (an average amount of electronic money unpaid in them during the recent 6 months shall not exceed LTL 3 million per month, they are not subject to the minimum own capital requirement and the own capital requirement).
Permits granted to establish one investment fund and to wind up another one
The Board of the Bank of Lithuania allowed UAB “Novus Asset Management” to approve the regulations of the open type complex special fund of investment in transferable securities “Novus Strategic Funds” being established by this company (which consists of two sub-funds: “Novus Balanced Portfolio” and “Novus Dynamic Portfolio”), its entire and abridged prospectuses, and to enter into a contract of depository services with Swedbank AB.
UAB “MP Pension Funds Baltic” has asked permission from the Bank of Lithuania to divide (wind up) the complex special investment fund “MP EFT Strategy Fund” established by it. The Board of the Bank of Lithuania allowed doing this, recognising as no longer valid the 13 May 2010 Resolution of the Securities Commission of the Republic of Lithuania No. 2K-101 on the said Fund.
As the Bank of Lithuania took over the functions of the Securities Commission this year, the Board of the Bank of Lithuania for the first time addressed the issues and adopted resolutions in relation to the activities of investment funds.
Discussed the Supervisory Review and Evaluation Process of AB SEB Bank
The Board of the Bank of Lithuania was provided with information on the Supervisory Review and Evaluation Process of AB SEB Bank and its results. During it, the process of evaluation of the Bank’s internal capital was assessed.
As AB SEB Bank is within Sweden’s SEB group, during the Supervisory Review and Evaluation Process the Bank of Lithuania closely cooperated with the institutions performing the supervision of the SEB group (of Swedish financial institutions in particular). The performed evaluations of all countries were discussed at a meeting of the SEB Supervisory College held in Stockholm. The coordinator of the work of the College (a representative of the Swedish Supervisory Authority) performed evaluation summaries of all the countries, prepared a report on the Supervisory Review and Evaluation Process of the entire SEB group which included the observations made by the members of the College.
In 2011 the SEB group’s Supervisory College adopted a joint decision regarding the capital adequacy of the Group’s units and the entire Group. Implementing the internal capital adequacy process and enhancing risk management in 2012, AB SEB Bank must take into account the Bank of Lithuania’s observations recorded in the report on the SEB group’s Supervisory Review and Evaluation Process.
The Bank of Lithuania, as a supervisory authority, checks each domestic bank’s internal capital adequacy assessment process at least once per calendar year.