2006-11-23
1. The Board of the Bank of Lithuania was presented the results of the inspection of Vilnius Branch of Bayerische Hypo- und Vereinsbank AG.
The inspection focused on finding out whether the financial statements and statements meant for supervisory purposes and submitted to the Bank of Lithuania were correct, as well as whether the bank managed to comply with the liquidity ratio and ensure internal control. Sampling method was used to check-up whether the data submission to the Loan Risk Database was done in line with the Rules for Managing the Loan Risk Database.
2. Regarding the results of the inspection of Ukio bankas
The Board of the Bank of Lithuania listened to the report on the results of the inspection carried out at Ukio bankas.
The inspection focused on the bank management, internal control, management of particular types of risks such as credit, liquidity, market and operational risks, as well as legal acts regulating banking activities and the observance to the internal rules.
Certain requirements have been established relating to strengthening of the bank's capital base and ensuring observance to prudential requirements when they deal with the lending to related persons.
Ukio bankas
has been instructed to remove by 31 March 2007 all the violations of legal regulations and deficiencies in the bank activities that were specified in the inspection report and notify the Bank of Lithuania thereof.3. Regarding the internal capital assessment process and supervisory review, and general provisions for the assessment process
In implementing the provisions of Article 22, 123, 124 and 136 as well as Annexes V and XI of Directive 2006/48/EC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions (recast) the Board of the Bank of Lithuania approved General Provisions for the Internal Capital Adequacy Assessment Process as well as General Provisions for the Supervisory Review and Assessment Process.
It has been established that this resolution will come into effect on 1 January 2007.
General provisions for the internal capital adequacy assessment process are to be used for the implementation of risk assessment and management procedures in the national commercial banks. They will help to adequately assess identification of the internal capital demand. To this purpose, banks will have to clearly identify and disclose to the Bank of Lithuania the types of risks they encounter and risks that are significant to them, and how these risks are measured and controlled.
It has been decided that it will be expedient to work out a risk measurement system in the supervisory authority, which would encompass the level of the risk types important to the bank and their management quality assessment (rating), and be an instrument of the supervisory authority for identification of the intensity of the bank supervision and allocation of human recourses. The risk assessment system shall constitute a part of the supervisory review and assessment process.
A dialogue with the bank, the intensity and comprehensiveness of which should be proportionate to the bank's market share, scope and complexity of the bank's business, and the accepted risk level shall be very important for the supervisory authority during the inspection and assessment of the bank’s internal capital adequacy measurement process.
If the supervisory institution finds out that the results of the internal capital adequacy assessment process indicate inadequate capital demand, it will be allowed to immediately request the bank to take actions related to the strengthening of the capital base or reducing of the bank's operational risk. Although the major role is given to the bank capital in this phase, other extra measures meant to limit operational risks of the bank can be applied too.
The national commercial banks and the Central Credit Union have familiarised themselves with the projects; many of the received comments have been taken into account.
4. Regarding information related to the general provisions on the disclosure of the prudential information
In implementing the provisions of the Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) the Board of the Bank of Lithuania approved the general provisions on the disclosure of prudential information.
It has been established that this resolution will come into effect on 1 January 2007.
According to the said article of the above Directive, supervisory authorities shall disclose information related to legal acts, methodological recommendations and other approved documents regulating prudential requirements for credit institutions, also information on general criteria and methodology used during supervisory review and assessment processes, and cumulative statistical data about major aspects of the implementation of the system based on prudential principles, etc.
The Directive has also established that the above information shall be executed electronically, using a harmonised form for all Member States, and be updated on a regular basis to ensure a possibility of comparison of the methods used by supervisory authorities of different Member States.
The Committee of European Banking Supervisors (CEBS) has prepared an information disclosure system consisting of standard tables, which would boost the efficiency of the search of the necessary information, and offer opportunity to compare it with the information from different countries. The information disclosure system will function at two levels: the website of CEBS will serve as a central data source and it will be linked with the websites of appropriate national supervisory authorities, where one will find comprehensive information about the implementation of the supervisory requirements set by the Directive. The said information will be available on the website of the Bank of Lithuania both in English and Lithuanian.
Statistical data items regarding credit risks by asset classes have been grouped to facilitate the calculation of cumulative data from the banks using different methodology.
5. Regarding the recognition of international rating agencies the risk assessment (ratings) by which may be used by banks to calculate capital adequacy
In implementing the provisions of Article 81(3) and Article 97(3) of the Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) the Board of the Bank of Lithuania has acknowledged that banks may use the credit risk evaluation (ratings) performed by international rating agencies such as Standard & Poor's, Moody's Investors Service, and Fitch Ratings to calculate capital adequacy.
It has been established that the above resolution will come into effect on 1 January 2007.
6. Regarding the amendments to references to the directives of the European Parliament and Council, which can be found in the resolutions of the Bank of Lithuania
In implementing the provisions of Article 157 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) and Article 49 of the Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) the Bank of Lithuania has established that the references in the resolutions of the Board of the Bank of Lithuania to Directive 2000/12/EC of the European Parliament and Council 20 March 2000 relating to the taking up and pursuit of the business of credit institutions of as well as the references to particular articles of the above Directive shall be considered references to the Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) and references to respective articles of this Directive.
It has also been established that the references to Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions as well as the references to particular articles of the above Directive shall be considered references to Directive 2006/49/EC of the European Parliament and Council of 14 June 2006 relating to capital adequacy of investment companies and credit institutions (recast) as well as any references to respective articles of this Directive.
This resolution shall come into effect on 1 January 2007.