2013-03-20
The financial markets positively assessed the solution for the problem of Ūkio bankas
The newest Lithuanian financial market data show that the market participants positively assessed the solution chosen by the Bank of Lithuania to deal with the problem of Ūkio bankas.
The indicator that reflects the assessment of the market participants regarding the country’s financial stability—the ten-year government bond spreads, which had peaked after the operation of Ūkio bankas was suspended, quickly stabilized, while on 19 of March they returned to the level at which they had been before the bank’s operation was suspended. The 2018 redeemable Lithuanian euro bonds interest rate, presently at 2.52 per cent, is even less than in mid-February.
“The response of the markets confirms once more that the chosen restructuring method for the problematic bank was the most suitable and having the least effect on public finances,” says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
Trust in the country’s banking system is expressed through the interbank market’s interest rate, which remained stable both after the suspension of the operation of Ūkio bankas, and after the proposal and implementation of means to deal with the crisis. For example, the three-month term VILIBOR interest rate in January was a low 0.47 per cent, and since then hasn’t changed.
The effect of the suspension of the operation of Ūkio bankas on the country’s financial stability was assessed also by the international ratings agency Standard & Poor’s, which has noted that the decision of the Bank of Lithuania to terminate the operating license of Ūkio bankas will have no effect on Lithuania’s ratings.
Standard & Poor’s indicated that they don’t believe that the bank’s restructuring will impact the financial stability of Lithuania’s banking system, since Ūkio bankas occupied less than 8 per cent of the market, if calculating the resident deposits.
On 12 of February the Board of the Bank of Lithuania restricted the operations of Ūkio bankas and appointed a temporary administrator. When it was established that the bank is insolvent, for the first time it was decided to solve the problem of the bank in such a way that a portion of the bank’s assets and liabilities would be transferred to another bank.
This created conditions for quickly restoring the provision of banking services to customers of Ūkio bankas, while the absolute majority of people and companies could dispose of their funds, held at Ūkio bankas, without any hindrances.