Bank of Lithuania
2012-08-02

The Bank of Lithuania adopted the General Regulations for Internal Management of Banks. This legal act was adopted to ensure that the bank’s organisational structure and internal management is efficient, based on long-term bank operation strategy and complies with the bank operation nature. This legal act also has an objective of strengthening the responsibility of the bank management bodies for reliable and safe operation of a bank, appropriate risk management and self-control.

“Appropriate risk management is an absolute priority; however, up to now, there was no legal act systemically defining in one place who should be responsible for what at a bank. The Regulations will clearly regulate the responsibility of bank management bodies for an appropriate organisation of the bank’s activity and the related risk management. Moreover, according to the new document, not only personal responsibility, but also joint responsibility of the members of the board and other management bodies for reliable operation of the bank will be required”, said Mr. Vytautas Valvonis, Director of the Supervision Service of the Bank of Lithuania.

According to him, the Regulations will require that each bank’s internal documents clearly define the distribution of responsibility and duties related to risk management and other processes.

One of the innovations awaiting the banks will be a regular (conducted no less than once per year) assessment of efficiency of a bank’s internal management system. Bank management bodies will need to ensure a clear regulation of such assessment and a smooth organisation of the assessment itself.

Banks will be required to submit the information about the results of the assessment of efficiency of the internal management system and the prepared action plan for the improvement of the internal management system to the supervisory institution, the Bank of Lithuania, each year.

The General Regulations for Internal Management of Banks also state that bank management bodies will need to ensure the creation and implementation of ethical and professional standards of bank activity. Clear requirements were established for the management of potential conflicts of interests. It is recommended that the system of interest declaration is created.

Bank management bodies will also be responsible for the internal management of the financial group: it is required that the organisational structure and internal management system of the financial group is based on the uniform principles and requirements.