Bank of Lithuania
2003-10-23

1. The Board discussed the results of the inspection of Medicinos Bankas carried out from August 25 to September 19, 2003.

The Bank was instructed to remove the shortcomings and violations in its operations by 31 December 2003, such as assessing the shortcomings in the classification of doubtful assets, establishing the conditional features of the criteria for determining suspicious monetary operations in order to ensure the prevention of money laundering in the bank, introducing more detailed regulation of the evaluation and accounting of assets taken over for debts, etc.

Taking into account the inspection conclusions, the Bank made additional specific provisions of LTL 1.14 million.

2. The Board discussed the results of the inspection of Siaulių Bankas carried out from August 25 to September 19, 2003.

The Bank was instructed to remove the shortcomings and violations in its operations by 31 December 2003, including efforts to ensure the effectiveness of bank internal control, etc.

Taking into account the inspection conclusions, the Bank made additional specific provisions of LTL 2.84 million and removed the violation of the maximum exposure requirement.

3. The Board gave permission to Ūkio Bankas to register changes in its Articles of Association related to the increase of the share capital from LTL 90,707,988 to the total of LTL 106,707,996.

4. The Board gave its permission for registering amendments in the Articles of Association of VB Mortgage Bank, with the exception of the amendment providing for continuous internal audit of the Bank to be ensured by the audit committee and the internal audit service of Vilniaus Bankas, the founder and sole shareholder of the Bank.

The above decision was based on the conclusion that such a provision does not meet the provision of the Law on Commercial Banks requiring a bank to have a permanent loan committee and an internal audit service.

5. The Board decided to give its consent to a group of persons, consisting of the private limited company Koversbank of the Russian Federation and the joint-stock company INCORION INVESTMENT HOLDING COMPANY of Luxembourg, for holding a qualified majority of the share capital and/or voting rights of Bank Snoras to the extent that Bank Snoras is controlled by it.

The permission will become effective after Konversbank receives the permission from the Central Bank of Russia to invest in the capital of Bank Snoras.

6. The Board revoked the permission for Norddeutsche Landesbank Girozentrale Vilnius Branch to operate in the Republic of Lithuania.

The decision was adopted on the grounds that the operations of Nord/LB Vilnius Branch were terminated after NORD/LB acquired the Agricultural Bank of Lithuania. The permission to NORD/LB for the acquisition and management of more than 2/3 of the Bank’s stock was granted by the Bank of Lithuania on 14 March 2002.

7. The Board amended and supplemented its resolutions “On the approval of the balance sheet and profit and loss account statement forms” and “On annual accounts published by banks”.

The amendments aim at increasing the information content of published statements and take into account the provisions of International Accounting Standards and EU directives. These resolutions will become effective as from 31 December 2003.

8. The Board decided to declare invalid the provision of the Rules for the Consolidation of Financial Statements and Consolidated Supervision establishing that financial accounts are not subject to consolidation in cases when the operations of a controlled undertaking is totally different from those of the parent bank.

The decision was based on the fact that under International Accounting Standards consolidated financial statements have to include not only controlled credit and financial undertakings but also all controlled undertakings irrespective of the differences in their operations. The resolution will become effective as from 31 December 2003.

9. The Board introduced amendments to the Regulations on Accounting and Reporting of Foreign Currency Operations by Banks.

The amendments establish that the revaluation of financial derivatives from changes in exchange rates shall be recognised as unrealised profit (loss) from operations in derivatives and other financial instruments.

In this way changes in the real value of financial derivatives - including the purchase and sale of currency as well as other types - should be reflected in the same item.

10. The Board amended and supplemented the regulations on the financial statements of the central credit union and the rules for the calculation of prudential requirements.

The amendments specify that the calculation of capital adequacy of the Central Credit Union should be done in the same way as it is done in banks, i.e. assessing both credit and market risks. The Board also adjusted the rules for calculating liquidity, maximum exposure and large exposure.

The amendments capture the fact that the Central Credit Union, which started operating a year ago, has expanded the range of its operations, which creates opportunities for new risks to emerge.

11. The Board reviewed the performance of credit institutions and the supervision of credit institutions in the third quarter of 2003. More detailed information on the topic is available on the website of the Bank of Lithuania.

12. The Board approved a new procedure for presenting statistical data necessary for the compilation of the Balance of Payments and the International Investment Position of the Republic of Lithuania.

Until 1 October the compilation of the Balance of Payments was regulated by a resolution of the Government and the Bank of Lithuania that was declared invalid, as it did not meet the new requirements in this field.

Under the new procedure, within its own competence, the Bank of Lithuania will establish the arrangements for the collection of the necessary statistical data, deal with methodological and related co-ordination issues.