Bank of Lithuania
2012-08-17

Prudential requirements to credit unions amended

In order to limit the concentration risk of credit unions, the Board of the Bank of Lithuania amended the Rules for the Calculation of Maximum Exposure and Large Exposure of Credit Unions and withdrew the large exposure ratio. It was established that from the beginning of the next year credit unions will have to include the funds in credit institutions, i.e. banks and credit unions, into the maximum exposure amount. Up to now, it was not required.

It is expected that the new procedure will encourage credit unions to invest free funds cautiously, thus helping to safeguard the deposits entrusted to them by the depositors.

According to the Law on Credit Unions, the maximum exposure ratio is currently not applied to those credit unions whose adjusted capital does not exceed LTL 2 million. As from 1 January 2013, this ratio will be obligatory to all credit unions, without consideration of the size of the adjusted capital. Therefore, the Board of the Bank of Lithuania decided to remove the large exposure ratio from the list of ratios from the said date, as this ratio will loose its importance as a prudential requirement for credit unions.

Requirements for candidates to become credit union managers tightened

The Board of the Bank of Lithuania amended the Rules for Issuing Permissions to Become Credit Union Managers by establishing stricter qualification and experience requirements to credit union managers. Credit union managers whose qualification raises doubts or candidates to such positions who do not comply with the established minimum requirements will need to pass a special exam.

The procedure for creating the examination commission and organising and conducting the exams as well as the exam evaluation criteria were indicated in the Rules of the Examination of a Manager of a Financial Market Participant Supervised by the Bank of Lithuania. It is planned that a standing examination commission will be formed.

For more detailed information, please see a separate press release.

Branches that terminate their activity will not need to submit reports

The Board of the Bank of Lithuania made a decision that foreign bank branches will not need to submit financial statements and reports for supervisory purposes to the Bank of Lithuania, when a decision has been made to terminate the activity of a branch after receiving permission for that from the Bank of Lithuania and the branch does not have assets and liabilities, with the exception of assets and liabilities related to the bank that established the branch.

The Rules for the Supervision of Foreign Bank Branches and Cooperation with the Supervisory Authorities of Other European Union Member States in the Supervision of Branches were supplemented in this manner, taking into consideration the fact that foreign banks that received permission to terminate the branch’s activity cease to engage in commercial activities, do not have customers and do not provide financial services, the existing contracts are related only to the daily maintenance activities and termination of business, therefore, the branches do not pose financial risk.

The current legal acts regulated the procedure of submission of reports of foreign bank branches to the Bank of Lithuania, but did not cover the information provision procedure in the cases of termination of activity of branches.

Lithuanian Economic Review and medium-term macroeconomic forecasts approved

The Board of the Bank of Lithuania approved the Lithuanian Economic Review and medium-term economic forecasts prepared by the Economics Department. The Review and the forecasts are available on the Bank of Lithuania website.