2013-01-24
The operating license of the credit union Švyturio taupomoji kasa has been revoked
Having assessed the credit union Švyturio taupomoji kasa during an inspection, the data collected on the credit institution’s especially risky and irresponsible activities, additional losses on bad loans and taking into account the data provided by the credit union itself on its financial position, the Board of the Bank of Lithuania has decided to permanently revoke the credit institution’s operating license.
As part of on-going control of the activities of credit institutions and having recorded the extremely rapid development of the credit union Švyturio taupomoji kasa, the Bank of Lithuania’s Supervision Service, in November of 2012 began to target its inspections. Inspectors found that the operation of the credit union is highly risky and there is a threat to depositors and public interest.
Recently there was a considerable increase in the credit union’s assets, on 31 October 2012 amounting to LTL 20.1 million, while the deposit portfolio was LTL 18.2 million. Some of the funds belonging to members of the credit unions were directed towards crediting of associate members (companies). During the period under review, the loan portfolio increased by LTL 5 million and accounted for 82.7 per cent of total loans. Inspectors found that in crediting associate members (companies), this credit union did not verify whether the borrower will be able to repay the loan, did not have the information necessary to evaluate the risks of the loans, the information provided by the borrower was not installed on the data validation system. In many cases, decisions on loans were economically unreasonable and non-transparent, while the presented business plans were unrealistic.
Even before the evaluation of the final results of the inspection, the Bank of Lithuania’s Supervision Service restricted the acceptance of deposits and the provision of loans by the credit union Švyturio taupomoji kasa.
After a detailed review of the credit union’s loans, it was found that the loan quality was poor and, in earlier financial statements to the Bank of Lithuania, the credit union’s real financial condition was not represented. After proper assessment of the loan portfolio, losses on bad loans in addition amounted to at least LTL 3.3 million.
It should be noted that after the inspection, in the financial statements and statements meant for supervisory purposes for the Bank of Lithuania, the credit union recognized, at the time of inspection, the need for additional specific provisions for bad loans.
With the formation of the necessary specific provisions, in the Bank of Lithuania’s 31 December 2012 financial statements, the assets of the credit union Švyturio taupomoji kasa stood at LTL 16.76 million; liabilities—LTL 18.31 million; capital—minus LTL 1.55 million, i.e. the net asset value of LTL 1.55 million is less than the liabilities.
The credit union Švyturio taupomoji kasa did not comply with all the capital-related prudential requirements. In order to comply with them, the union had to increase the share capital by at least LTL 3 million, but the management of the credit union did not present to the Bank of Lithuania any real plans as to how its operations may be re-stabilized.
The Board of the Bank of Lithuania, considering the credit union’s financial condition, the multiple breaches of legislation recorded in its activities, and the threat posed to the safety of depositors’ money, decided to recognize the credit union Švyturio taupomoji kasa as insolvent and to revoke its operating license.
In the near future, the District Court of Klaipėda will be called on regarding the institution of bankruptcy proceedings against this credit institution, as well as the appointment of a bankruptcy administrator. In view of the fact that the Financial Crime Investigation Service under the Lithuanian Ministry of the Interior carries out the activities related to the pre-trial investigation of the credit union and assessment of the risk that until the appointment of an administrator the finances of the Credit Union Švyturio taupomoji kasais may be lost, the Board of the Bank of Lithuania temporarily restricted the credit union’s ability to dispose of cash and securities held in its bank accounts.
According to the Law on Insurance of Deposits and Liabilities to Investors, applying of operational shortcomings to insolvency is an insured event, so the depositors of this credit union will be paid deposit insurance compensations.
Insurance compensations will be paid and calculated in accordance with the procedures approved by the state enterprise Deposit and Investment Insurance. According to it, in the event of an insured event, 100% of the deposit amount will be compensated, up to 100,000 euros (LTL 345,280), and the client’s compensation shall be paid within 20 working days from the day of the event—from 24 January 2013, the Board of the state enterprise Deposit and Investment Insurance may extend the compensation payment period, but not exceeding 10 working days.
For more information about deposit insurance, please see the website of the state enterprise Deposit and Investment Insurance or contact by phone. (8 5) 213 5657