European best practices for the development of the Lithuanian financial market

“We aim to harmonise Lithuanian financial market regulation with leading EU practices and create a digital environment that is open and proportionate to innovation. We are constantly reviewing and eliminating excessive national requirements to ensure that the rules are clear and applied uniformly. We collaborate with both financial market participants and supervisory authorities across the EU and individual countries on this issue,” says Gediminas Šimkus, Chair of the Board of Lietuvos bankas.

When reviewing legal regulation, Lietuvos bankas follows the principle of risk-based supervision set out in its supervisory policy, which means applying appropriate and more flexible regulation to lower-risk areas to enhance the attractiveness and competitiveness of the Lithuanian financial sector. 

One of the most important regulatory initiatives was the amendments to the Republic of Lithuania Law on the Prevention of Money Laundering and Terrorist Financing, drafted by Lietuvos bankas together with other institutions and financial market representatives and which entered into force in July this year. They concern the requirements for simplified customer due diligence, allowing financial market participants to have greater flexibility in the use of anti-money laundering and counter-terrorist financing measures in lower risk cases. The amendments are particularly important and relevant for the fintech and other sectors (life insurance companies, pension accumulation companies, etc.) that serve customers whose activities are associated with a lower risk of money laundering and terrorist financing. They also introduce simplified procedures for the use of document validation certificates and for obtaining information from reliable and independent databases or registers.

In addition, the Board of Lietuvos bankas updated its resolution on the supervisory authority’s choice to apply the exemptions provided for in EU banking sector regulations. Supervisory authorities are given the possibility to take into account the specificities of the national financial market, impose stricter requirements on higher-risk credit institutions or, following the principle of proportionality, relax certain requirements in lower-risk areas.

Moreover, the Board of Lietuvos bankas approved the updated General Regulations on the Submission and Examination of Applications for the Authorisation of Financial Market Participants Supervised by Lietuvos bankas and on the Granting of Authorisation. Lietuvos bankas has taken into account the proposals received to reduce the administrative burden, and therefore applicants will no longer have to submit to Lietuvos bankas legalised or APOSTILLE-certified documents drawn up or issued in foreign countries in every case. Such documents will be required only if there is a need to verify their authenticity or reliability. 

In licensing and related processes, Lietuvos bankas has fully phased out printed documents, requiring that the documents be submitted to Lietuvos bankas through the administrative and public e-services portal. The procedure for certifying the authenticity of document copies has also been simplified.

We would like to remind you that earlier this year Lietuvos bankas invited all interested financial market participants to evaluate national regulation and submit proposals for its improvement, including specific comparisons with the legal regulation of other EU countries. The feedback received was assessed against the principle of risk-based supervision and has been gradually implemented, for example:

• The reporting deadline for credit unions was extended;
• Lietuvos bankas provided an analysis of and proposals for waiving a spouse’s power of attorney in the sale of financial instruments. They are assessed by the Government;
• Processes for implementing the European supervisory authorities’ guidelines and issuing letters of expectation to financial market participants were reviewed;
• The inspection process in under review;
• Discussions are ongoing on the review of the regulation of collective investment undertakings for informed investors;
• Further simplification of licensing-related processes is being assessed.

Supervision of financial market participants, Financial sector development, Banks, Payment institutions , Electronic money institutions