2004-12-23
1.The Board expressed its agreement to the Bank of Lithuania Action Plan on the Adoption of the Euro.The Plan outlines the necessary measures for the alignment of the legal framework, preparation for the changeover, public information campaign, development of the infrastructure of the BoL, monetary policy in the new environment and other organisational measures.It also anticipates co-operation among Lithuanian and EU institutions.
The BoL is planning to draft the Law on the Adoption of the Euro next year and submit it to the Government and the Seimas for consideration.In the opinion of the BoL, the Law should define the general issues of recognising the euro as legal tender of the Republic of Lithuania and the withdrawal of the litas from circulation.
The Plan provides for the preparation of conclusions on the acceptability of the planned date for the adoption of the euro.The final multilateral decision on the issue will be taken by EU institutions.
Next year the Bank of Lithuania will develop its proposals on the optimal dual circulation (litas and euro) period.
It will also be proposed that in all legal acts, agreements and financial instruments the litas should be treated as the euro, while its value should be recalculated on the basis of the irrevocable exchange rate of the litas.
It is planned that the Bank of Lithuania will undertake to exchange the litas into the euro for an unlimited period free of charge.
A list of measures will be drawn up to discourage commercial banks from charging for currency exchange at the time of the changeover to prevent the public and companies from incurring unjustified expenses.Possibilities will be considered to arrange the exchange of the litas cash at the Bank of Lithuania at nominal value, set a minimum amount for exchange of the litas into the euro in commercial banks, and engaging post offices and shopping centres into the changeover exercise.
The BoL will make a proposal on a period for indicating prices in both litas and euro (for instance, for one year prior to the adoption of the euro).
Following consultation with interested institutions, proposals will be made on the ways of recalculating and rounding up the value of financial assets and liabilities.
The BoL also plans to hold consultations with the Ministry of Justice and other institutions on the necessity of amending the provisions of the Constitution with respect to the right to issue currency.Having regard to the Convergence Reports of the European Central Bank and the European Commission published this year, the Law on the Bank of Lithuania will have to be amended.In addition, other laws, such as the Law on Currency Issue, Law on Money, Litas Credibility Law and Law on Foreign Currency will have to be amended or repealed.
The BoL Plan also provides for organisational preparation for the cash changeover,including the provision of euro banknotes and coins and euro cent coins.
The Bank of Lithuania Plan on the Adoption of the Euro also focuses much attention on the provision of information to the public.It provides for the measures to acquaint the public with all aspects of the adoption of the euro:the date of the adoption, the dual circulation period, arrangements for the litas exchange into the euro, etc.In addition, the public will be provided with comprehensive information on euro banknotes and coins and their security features.
A renewed accounting methodology for individual BoL financial instruments will have to be prepared and introduced by 2007 following the requirements of the Eurosystem.The methodology and procedures for drawing up financial statements to be presented to the ECB will be prepared and implemented.They will include issue of euro banknotes and coins, monetary policy instruments of the European System of Central Banks (ESCB), TARGET operations, calculation of monetary income, etc.
2.The Board agreed to the directions for the integration of the Bank of Lithuania in the European payment system TARGET.Participation in the currently operating TARGET system or its replacement TARGET2 will be mandatory following the adoption of the euro.
TARGET came online as from 2 January 1999.It represents a centralised system consisting of 15 payment systems of the old EU Member States and the European Central Bank payment mechanism.TARGET2 is currently under development.It will implement the most advanced payment system functions.In contrast to the current TARGET system, TARGET2 will operate on the basis of a unified technical platform.
TARGET2 is expected to start operating on 2 January 2007.The Bank of Lithuania and domestic commercial banks have to be prepared to participate in this payment system by that date.
The European System of Central Banks (ESCB) has initiated a project for joining the current system TARGET, in case the new EU Member States, including Lithuania, adopt the euro in the second half of 2006, i.e. prior to the start of the operation of TARGET2.Participation in the current system is subject to simplified requirements.
The Bank of Lithuania has opted for the opportunity offered by the ESCB of linking to the TARGET system through the RTGSplus system of the Deutsche Bundesbank.The Bank of Lithuania and commercial banks have to be prepared for that by 30 June 2006.If Lithuania adopts the euro before the start of TARGET2, the Bank of Lithuania would become a direct participant of RTGSplus and TARGET, while domestic commercial banks could effect settlements through the Bank of Lithuania or another foreign commercial bank that is a direct TARGET participant.Lithuanian commercial banks will be able to become direct participants in RTGSplus if they wish so.
3.The Board reviewed the results of the inspection of the Medicinos bankas carried out from 18 October to 12 November 2004.
The Medicinios bankas was instructed to remove the shortcomings indicated in the inspection report by 15 February 2005, including compliance with the rules on the management of the Loan Risk Database approved by the Bank of Lithuania, the assessment and classification of doubtful assets and operational risk management.
The Medicinos bankas has already drawn up a plan for the removal of the shortcomings revealed during the inspection and has presented it to the Credit Institutions Supervision Department of the Bank of Lithuania.
4.The Board authorised Bank Snoras to register amendments to its Statutes approved at the extraordinary shareholders meeting held on 25 November 2004 in relation to the changes of rights related to shares, competence of the bodies of the Bank and changed procedures for the election and revocation of members of such bodies.
The new edition of the Statute of Bank Snoras was adopted as a result of the entry into effect of new provisions contained in the Law of the Republic of Lithuania on Banks, Company Law and Law on Financial Institutions.
5.The Board amended its previous decision on the approval of BoL Foreign Reserve Management Guidelines of December 2002.Given the changing market conditions, the BoL decided to change the date for the formation of the investment portfolio, the liquidity ratio and credit risk limits, foreign exchange reserve valuation and reporting principles.The BoL Investment Committee will establish the gold portfolio valuation and reporting procedures.
6.The Board was presented a report of the BoL Market Operations Department on the acceptability of the foreign exchange reserve management strategies and assumed level of risks with the aim of achieving the Bank of Lithuania foreign exchange management targets.It was ascertained that the current investment strategy met the raised requirements.Ways of improving it were also discussed.
7.The Board authorised the Open Stock Company of the Republic of Belarus Djem-Bank to establish a representative office in Lithuania.
According to the available information, the representative office will be set up in the rented premises at 3 Naugarduko St in Vilnius.
According to the data for 1 January 2004 published by Djem-Bank, the Bank’s own capital amounted to BYR 27.895 billion (LTL 35.6 million), and its authorised capital was BYR 12.809 billion (LTL 16.3 million).At the end of last year, the assets of the Bank made up BYR 69.274 billion (LTL 88.3 million).