2009-02-17
1. On the results of assessment of the readiness of AB bank “Hansabankas” to apply the Internal Ratings Based Credit Risk Approach
The Board of the Bank of Lithuania granted AB bank “Hansabankas” (procedures to change the name into Swedbank are in progress) a possibility to apply the Internal Ratings Based Credit Risk Approach to the group of institutional exposures (except for the exposures on regional and local government, investment firms), the group of corporate exposures (except for the exposures on non-profit organisations, public bodies, insurance undertakings and receivables that are not considered as exposures on sellers), and the group of retail exposures (except for minor retail lease exposures of natural persons and reverse repurchase agreements concluded with any debtors and receivables that are not considered as exposures to sellers) as of 1 March 2009.
The Board of the Bank of Lithuania has approved the General Provisions for the Calculation of Capital Adequacy. The provisions introduce a completely new concept of credit risk assessment in line with the requirements of the Basel Committee on Banking Supervision, referred to as Basel II, and with the EU directives on the new system of capital adequacy of banks.
The Internal Ratings Based (IRB) Credit Risk Approach is a credit risk approach of the EU Member States for the purposes of calculating capital adequacy. This approach is based on determination of credit risk components and application of relevant risk weighting functions for the positions held by the bank, taking into account the internal ratings and supervision standards set by the bank itself. Using this approach, capital requirement depends on the level of risks of an individual bank because banks may rely on their internal calculations of risk components (probability of default, loss given default (LGD), and the conversion factor (CF). When using this approach to determine capital requirement, a greater credit risk differentiation and a more precise quantitative value of capital requirement is achieved, as the functions of the risk weightings have been obtained by a statistical method.
Bank “Hansabankas”
has prepared to apply the new credit risk approach in calculating capital adequacy. In order to assess this preparation, the Bank of Lithuania, in cooperation with the Swedish, Estonian and Latvian supervisory authorities, evaluated information on the credit risk approach to be applied, and carried out a target inspection. Suggestions on how to improve the preparation to apply the Internal Ratings Based Credit Risk Approach were provided. AB bank “Hansabankas” has taken them into account.
2. On the approval of Regulations on the Non-banking Sector Enterprise Certificate System
The Board of the Bank of Lithuania approved the Regulations on the Non- banking Sector Enterprise Certificate System.
The Non-banking Sector Enterprise Certificate System has been developed to ensure safe and authentic transmission of information of economic entities to the information systems of the Bank of Lithuania. Digital certificates are issued to authorized staff of the System participants and used for user authentication, or for authentication and signing of data in the information systems of the Bank of Lithuania. In this System, certificates will be ordered and received via Internet.
The Regulations specify the purpose and operation of the System, the rights and obligations of the System participants, certified users and the System operator, the System?s data protection requirements; the operation of the System under contingency conditions (on the failure of hardware or software) is described.
The Regulations shall become effective on 23 February 2009.