2014-01-17
The license of the credit union Vilniaus taupomoji kasa was revoked due to failure to comply with capital adequacy and other prudential requirements
Taking into account that the credit union Vilniaus taupomoji kasa fails to comply with all the prudential requirementsand its operations and financial situation pose a threat to the interests of depositors, creditors and the public, the Board of the Bank of Lithuania recognised this credit institution as being insolvent and revoked its operating license.
The credit union Vilniaus taupomoji kasa (VTK), in its financial statements for the Bank of Lithuania, admitted that on 31 December 2013 it did not perform all of the prudential requirements for credit unions: capital adequacy, liquidity, maximum open position in foreign currency and maximum exposure for a single borrower.
On 31 December 2013, VTK’s capital adequacy ratio, according to the capital adequacy report data, was only 1.46 per cent, while the requirement is 20 per cent. VTK has not been in compliance with the capital adequacy requirement for six months in a row; therefore, according to legislature, this is a basis for recognising a union as being insolvent. This was done having assessed that VTK was unable to implement capital strengthening measures which would ensure the execution of prudential requirements and the continuity of the credit union’s operations, while the union’s follow-up activities, with the deterioration in loan portfolio quality, would pose a threat to the funds of the credit union’s depositors.
During inspections performed by the Bank of Lithuania, these legislation violations by the credit union were identified more than once. Irresponsible lending resulted in the level of the credit risks undertaken by the credit union being very high, and the credit union was unable to take appropriate actions to prevent this risk. The decisions of previous heads were taken contrary to the principles of safe and sound credit institution operation and were to satisfy the interests of a group of people related to the credit union’s heads. VTK also failed to comply with recommendations presented to the union by the Central Credit Union of Lithuania, which performed an assessment of VTK’s financial situation.
The Bank of Lithuania, having identified during the inspection suspicious transactions, presented the information to the criminal authorities, requesting that they, within their competence, assess the circumstances indicated in the credit union inspection report. The Bank of Lithuania informed that the Financial Crime Investigation Service is currently performing a pre-trial investigation of possible criminal activities related to VTK.
Taking into account the risks raised, the Bank of Lithuania for some time has applied strict enforcement measures to VTK. Last year, in May, VTK’s previous management was deposed. Having failed to eliminate the deficiencies in their activities, as instructed by the supervisory institution, last year in October the administrative head of VTK received an administrative penalty. Aiming to prevent the growth of credit risk last year in January the Bank of Lithuania ordered VTK to limit the amounts of issued loans and obligated that deposit rates by set according to the market average.
In the nearest future, the Vilnius District Court will be requested to initiate bankruptcy proceedings for this credit institution. UAB Verslo konsultatai have been proposed as administrators of the credit union Vilniaus taupomoji kasa.
Also, temporarily, the Board of the Bank of Lithuania, until the Vilnius District Court reaches a decision on whether to initiate bankruptcy proceedings, limited VTK’s right to use the funds and securities in the accounts of credit institutions.
Having revoked the credit union’s license, VTK does not have the right to provide financial services.
According to the financial statement data of 31 December 2013, the assets of the credit union amounted to LTL 275.1 million, liabilities — LTL 272.7 million, of which deposits were LTL 236.9 million. The adjusted capital amounted to LTL 2.4 million, while the credit union’s losses in 2013 grew to LTL 32.4 million.
According to the Law on Insurance of Deposits and Liabilities to Investors, enforcement measures applied due to insolvency is an insured event; therefore the credit union’s depositors will be paid deposit interest claims.
Insurance claims will be paid and calculated according to the procedures approved by the public company VĮ Indėlių ir investicijų draudimas. According to it, in the case of an insured event 100 per cent of the deposit amount is compensated if it does not exceed EUR 100,000 (LTL 345,280). The claim is paid out to the customer within 20 days after the date of the insured event — 17 January 2014. The board of VĮ Indėlių ir investicijų draudimas can extend the claim payment period, but no longer than by 10 business days.
The newest information on VTK, relevant to customers, is provided by calling the free of charge phone line of the Central Credit Union of Lithuania — 8 800 00030, and their website: http://www.lku.lt. Information on the Bank of Lithuania’s decisions can be found by calling the Bank of Lithuania’s special phone line (8 5) 268 0068 and at http://www.lb.lt. More information on deposit insurance — at the VĮ Indėlių ir investicijų draudimas website http://www.iidraudimas.lt or by phone: (8 5) 213 5657.
