2008-07-24
1. On the results of inspection, supervisory review and assessment of AB DnB NORD bank
The Board of the Bank of Lithuania listened to the information presented by the Credit Institutions Supervision Department about a target examination of AB DnB NORD bank and a supervisory review and assessment conducted by the central bank of the Republic of Lithuanian for the first time.
The Inspection Commission of the Bank of Lithuania reviewed the management of, internal control and credit and liquidity management at DnB NORD bank.
While presenting the inspection results to the Board of the Bank of Lithuania it was noted that during the examined period DnB NORD bank expanded its credit activities, the growth rates of its loan portfolio outpaced the growth of the domestic banking system.
The inspection report also listed the deficiencies in the operation of the bank, including that the bank did not always adequately assess the risk arising from the conclusion of transactions in relation to the financing of customer real estate projects.
During the DnB NORD bank’s supervisory review and assessment process both the internal capital adequacy assessment process conducted by the Bank, referred to as ICAAP, and the Bank’s risk management processes were reviewed and assessed. Both during the off-site inspection, while conducting a primary ICAAP review, and inspection the preconditions applied to ICAAP, risk assessment and management methods selected by the Bank, and risk reduction methods were analysed. It was pointed out that individual elements of ICAAP were to be improved; in addition, the Bank has to improve its risk management systems.
Having assessed the inspection results, the Board of the Bank of Lithuania set certain requirements in order to enhance the capital base of DnB NORD bank.
DnB NORD bank was instructed to remove the violations of legal acts and deficiencies in its operation indicated in the inspection report by 1 January 2009.
2. Review of the Lithuanian Economy (July 2008) and Medium Term Macroeconomic Projections
The Board of the Bank of Lithuania listened to the information of the Economics Department on the current situation of the Lithuanian economy and its likely further development, and adopted the medium-term macroeconomic projections of the Bank of Lithuania.
The report about it will be published on the Bank of Lithuania’s website.
3. On statistical reporting of the interbank lending/borrowing and foreign exchange market
The Board of the Bank of Lithuania approved General Provisions on the Interbank Lending/Borrowing and Foreign Exchange Market Requirements Statistical Reporting. The document establishes the procedure for the preparation of such reporting, defines the requirements for the quality of statistical information and its provision to the Bank of Lithuania, and the conditions of its use.
Also, Interbank Lending/Borrowing Statistical Reporting Form F0601 and Foreign Exchange Market Statistical Reporting Form F0603 were approved. It was established that the data of these forms shall be provided to the Bank of Lithuania by banks included in the statistical list of Lithuania’s monetary financial institutions and foreign bank branches. They will have to do it from February 2009, starting with the data as of January 2009.
The burden of reporting will ease for banks and foreign bank branches, as the currently prepared weekly reports will be replaced by monthly ones. In the General Provisions it is indicated that the Bank of Lithuania, where necessary, may establish another periodicity.
In the new interbank lending/borrowing statistical report, data on repurchase agreements will be additionally collected, transactions with a bank within a financial group will be identified, and data on the date of conclusion of the transaction will additionally be collected. In the foreign exchange market statistical report data on transaction rates are relinquished, information on the amounts of currency purchased and sold will instead be collected.
4. On changing the provisions on granting Vladas Jurgutis award
The Board of the Bank of Lithuania changed the provisions on granting Vladas Jurgutis award. It was established that this award shall be granted by the Bank of Lithuania and the Lithuanian Academy of Sciences under a cooperation agreement between the Bank of Lithuania and the Lithuanian Academy of Sciences.
The Bank of Lithuania established Vladas Jurgutis award in 1997 to mark the merits of the first Governor of the Bank of Lithuania, Vladas Jurgutis for Lithuanian banking commemorating the 75th anniversary of the establishment of the Bank of Lithuania and the litas.
Among the arguments of the Lithuanian Academy of Sciences for changing the status of the award was that Vladas Jurgutis was appointed full member of the Lithuanian Academy of Sciences in 1941 (economics) and head this institution for some time until his exile to a concentration camp.
Vladas Jurgutis award is granted for works (monographs, course books, scientific articles published, theses) significant for Lithuanian banking, in the fields of finance, monetary and macroeconomic research during the recent five years. Currently it amounts to 20.000 litas.
The winner of the award is announced, a laureate diploma and the award are handed out when commemorating Vladas Jurgutis' birthday in November (he was born on 5 November 1885).
The award has already been handed out thrice: to Professor Alfonsas Zilenas for significant works in the fields of banking and finance (in 2007), Stasys Sajauskas and Dominykas Kaubrys for the work “The Numismatics of the Grand Duchy of Lithuania” (in 1998), and Vladas Terleckas for his books published in 1995?1999 and articles on the history of Lithuanian banking (in 1999).
6. On inclusion of a subordinated loan in the capital of the Central Credit Union of Lithuania
The Board of the Bank of Lithuania permitted the Central Credit Union of Lithuania to include a subordinated 8-year loan of EUR 500,000 (LTL 1,726,400) received from the Belgian public liability company COOPEST SA in Tier 2 capital of the Central Credit Union of Lithuania.
According to the CCUL, the enlarged capital base will provide possibilities for increasing assets, developing activities and, given the use of the attracted funds of the subordinated loan for investment, will positively affect the CCUL’s income. According to the calculations of the CCUL, the funds of the subordinated loan will provide conditions to increase the loan portfolio and will have a positive influence on compliance with its other prudential requirements (capital adequacy and liquidity).
7. On permission to become head of the representative office of Balkan Investment Bank AD Banja Luka in Kaunas
The Board of the Bank of Lithuania listened to the information on permission to become Deputy Administrative Director of the representative office of Balkan Investment Bank AD Banja Luka in Kaunas, as the former Deputy Director of the representative office has been dismissed from his position on his own request.
8. Information on the operations of credit institutions and the activities of the Credit Institutions Supervision Department in the second quarter of 2008
The Board listened to the information on the operations of domestic credit institutions and the activities of the Credit Institutions Supervision Department of the Bank of Lithuania in the second quarter of 2008.
The latest review of the operations of commercial banks, the Central Credit Union of Lithuania and credit unions is available in the section “Credit Institutions” of the website of the Bank of Lithuania.
9. Report on foreign reserve asset investment (the first half of 2008)
The Board of the Bank of Lithuania listened to a report of the Market Operations Department on foreign reserve asset investment in the first half of 2008.
It was noted that this half-year was characterised by particularly high instability of financial markets and increased credit risk. The Bank of Lithuania took measures to ensure safety of investment.