Bank of Lithuania

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What is macroprudential policy?

We contribute to the safeguarding of stability of the financial system by implementing macroprudential policy, the goal of which is to enhance the resilience of the financial system and reduce the formation of systemic risk, thereby seeking to ensure a sustainable contribution of the financial sector towards economic growth.

The global financial crisis clearly demonstrated what a significant negative impact financial instability can have on a country’s economic growth and employment. Seeking to diminish the possibility of financial crisis formation, the EU restructured the institutional and regulatory framework for financial sector’s supervision.

One of the key components of this reform is explicit granting of the mandate for macroprudential policy implementation to the responsible authorities in each EU country.

Since 2014 macroprudential policy in Lithuania is carried out by the Bank of Lithuania which was granted a sole responsibility to conduct macroprudential policy by the Law on the Bank of Lithuania.

The primary objective of macroprudential policy is to contribute to the safeguarding of stability of the financial system, including enhancement of the resilience of the financial system and reduction of the formation of systemic risk, thereby seeking to ensure a sustainable contribution of the financial sector towards economic growth.


Macroprudential Policy Strategy

We take decisions ensuring financial stability in accordance with the Macroprudential Policy Strategy (153.9 KB ), which provides for five interim objectives:

  1. to limit and prevent excessive credit growth;
  2. to limit and prevent the surplus of liquidity and other risks in the financial system;
  3. to limit large exposure concentrations in certain economic activities;
  4. to limit the systemic impact of misaligned incentives of financial institutions in order to reduce their moral hazard;
  5. to strengthen the resilience of the financial market infrastructure.

Macroprudential policy instruments

Instrument Description of instrument Level         Valid from Legal acts Related documents
Loan-to-value ratio (LTV) To limit the excess credit risk assumed by financial institutions and develop a responsible borrowing practice by preventing households from becoming overindebted, and thus creating conditions for sustainable credit growth 85%

1 November 2015

History (31 KB )

Responsible Lending Regulations (205.3 KB )

Assessment of the compliance of rent-to-own services with the Responsible Lending Regulations and risks to consumers (306.6 KB )

Debt service-to-income ratio (DSTI) To limit the excess credit risk assumed by financial institutions and develop a responsible borrowing practice by preventing households from becoming overindebted, and thus creating conditions for sustainable credit growth 40%

1 November 2015

History (31 KB )

Responsible Lending Regulations (205.3 KB )

Assessment of the compliance of rent-to-own services with the Responsible Lending Regulations and risks to consumers (306.6 KB )

Loan maturity To limit the excess credit risk assumed by financial institutions and develop a responsible borrowing practice by preventing households from becoming overindebted, and thus creating conditions for sustainable credit growth 30 years

1 November 2015

History (31 KB )

Responsible Lending Regulations (205.3 KB )

Assessment of the compliance of rent-to-own services with the Responsible Lending Regulations and risks to consumers (306.6 KB )

Stress test/sensitivity test To limit the excess credit risk assumed by financial institutions and develop a responsible borrowing practice by preventing households from becoming overindebted, and thus creating conditions for sustainable credit growth 50% 1 November 2015

Responsible Lending Regulations (205.3 KB )

Assessment of the compliance of rent-to-own services with the Responsible Lending Regulations and risks to consumers (306.6 KB )

Countercyclical capital buffer To secure the banking system against potential losses, when  excessive credit growth leads to the build-up of systemic risk 0%

30 September 2017

History (12.6 KB )

Resolution (60.2 KB )

Countercyclical Capital Buffer: Background Material for Decision (611.1 KB )

Data (287 KB )

Other systemically important institutions buffer

To increase the resilience of systemically important institutions to shocks at country level, thus decreasing the possibility of their bankruptcy 0.5–2%

31 December 2016

Resolution (128.7 KB )

Application of the capital buffer requirement for other systemically important institutions in Lithuania (716.2 KB )

Capital conservation buffer To obligate banks to accumulate additional capital to cover unexpected losses 2.5% 30 June 2015 Resolution (375.5 KB )  

Financial stability monitoring

We aim to ensure that credit institutions operate in a competitive yet stable environment. Hence, we strengthen the resilience of both individual credit institutions and the entire domestic financial system to internal and external economic shocks as well as ensure effective allocation of scarce financial resources.

We supervise credit institutions and payment systems, assess potential threats to effective and continuous functioning of credit institutions, conduct surveys of financial market participants, as well as collect and analyse statistical and other information. In cooperation with Lithuanian and foreign institutions, we offer tools that help avoid and mitigate threats to the stability of the financial system.

Analysis of the main risks to the stability of Lithuania’s financial system is presented in the Financial Stability Review, published on an annual basis.

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Last update: 07-12-2017