Bank of Lithuania to provide emergency liquidity assistance for a wider range of financial market participants
The Seimas of the Republic of Lithuania has adopted an urgent amendment to the Republic of Lithuania Law on the Bank of Lithuania, giving the green light for more financial institutions to apply to the central bank for liquidity loans.
“The amended Law will allow solvent credit or other financial institutions, including payment and electronic money institutions, management companies and insurance undertakings, which are facing temporary liquidity problems to apply to the Bank of Lithuania for emergency liquidity assistance. The Bank of Lithuania is planning to update the procedure for granting liquidity loans by the end of this week,” said Marius Jurgilas, Member of the Board of the Bank of Lithuania.
The Bank of Lithuania intends to provide liquidity assistance to financial institutions that are significant for the effective operation of the country’s financial system and can secure loans by adequate collateral, in case they have already exhausted all other options, including borrowing from banks or other market participants, as well as used their shareholder contributions. Liquidity loans are to be provided at the European Central Bank’s Marginal Lending Facility rate plus 1 percentage point, which would currently stand at 1.25%. Such loans will be granted against collateral, meaning that the borrowing financial institution should pledge its assets which meet the requirements set by the Bank of Lithuania (e.g. debt securities, credit claims, other financial instruments or any alternative eligible assets). The systemic significance of financial institutions, their weight in the financial system and compliance with other requirements for obtaining a liquidity loan will be subject to assessment by the Liquidity Loans Committee of the Bank of Lithuania.