We currently supervise over 800 financial market participants – banks, credit unions, insurance undertakings, payment institutions, management companies, consumer credit providers, issuers, etc. Financial market supervision is financed by contributions of financial market participants and other funds of the Bank of Lithuania.
In supervising the financial market, we use the risk-based approach to supervision, meaning that we allocate our resources towards systemically most significant financial market participants or financial services and products posing the highest risk for consumers. We supervise the financial market in accordance with the financial market supervision policy.
In supervising the financial market, we aim to ensure:
- A reliable, competitive, effective and sustainable financial market;
- Responsible and mature financial market participants;
- The improvement of the quality and accessibility of financial services and inclusion of various social groups.
We implement this objective through micro-prudential supervision and financial service and market supervision.
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Prudential supervision
Prudential supervision is focused on specific financial market participants. We aim to ensure that they operate in a safe and sound manner, are liquid and adequately capitalised, as well as effectively and duly manage the risks assumed, thus contributing to the stability and credibility of the whole financial system.
Financial services and markets supervision
Financial service and market supervision is centred around consumers and their relationship with financial service providers. We seek to ensure that financial services are provided in a proper manner, without prejudice to the interest of consumers, and that financial market participants act responsibly and provide correct and comprehensive information on financial products and services to the consumers. In supervising the financial services and markets, providing proposals on the regulation of this area and making information on financial services and markets public, we work towards ensuring that individuals make rational financial decisions and their rights are protected. Find out more in quarterly reviews.
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How do we supervise the financial market?
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Licensing
We grant authorisations and issue licences to financial market participants. By authorising, we aim to ensure that the participants entering the market are reliable, transparent and financially viable, while their management is competent and of good repute.
Supervision
Off-site supervision. Under current domestic legislation, market participants are obligated to periodically present financial data and other operational information to the Bank of Lithuania. We evaluate and analyse this data, seeking to assess and prevent potential risks in the early stages.
Inspections. We periodically carry out inspections of financial market participants. At the beginning of each current year, we publish a routine inspection plan. Announcing inspections in advance serves as an additional preventive measure which helps financial institutions to assess potential operational shortcomings and eliminate them in advance. This results in a faster and more efficient inspection process. In response to changes in the activities of financial market participants or complaints received and taking into account emerging risks, the published inspection plan may be adjusted.
Single Supervisory Mechanism. After becoming a member of the euro area, on 1 January 2015 Lithuania also joined the banking union’s Single Supervisory Mechanism. The European Central Bank, in cooperation with Bank of Lithuania experts, supervises the major banks registered in Lithuania.
Consumer protection
We ensure that financial market participants provide services honestly, fairly and professionally, as well as solve disputes between consumers and financial service providers. Having received a consumer complaint, we may proceed with an inspection of a financial market participant – an investigation or an on-site visit.
Regulation
In order to ensure the quality and legal clarity of regulation, we draft various legal acts and regulations for market participants. We also submit proposals on the legislative process or amendments to the laws to other state authorities.
Consulting
As we aim to prevent possible violations of financial market legislation, we pay close attention to the prevention and consultation, i.e. we draw up guidelines, recommendations, regularly update the FAQ section, organise consultation events or specialised meetings with financial market participants, for example, regular meetings with compliance specialists, etc. All measures related to consulting help financial market participants to better understand the legal requirements and to properly implement them.
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What is risk-based supervision?
We use risk-based supervision to supervise the financial market. The main precondition for this approach is that not all financial market participants or services provided by them pose equal threats to the stability of the financial system and consumers. Hence, we, as a supervisory institution, firstly allocate our resources towards systemically more significant financial market participants or financial services and products posing the highest risk for the stability of the financial system and consumers. In this case, risk related to less important financial market participants or low-risk services is more tolerated.
The risk-based approach to supervision is based on the risk assessment system.
The risk assessment system helps to identify and assess:
- current and future risks, to which a financial market participant is or might be exposed;
- abilities of a financial market participant to identify the risk as well as assess, monitor and manage it;
- the risk, to which a financial market participant is or might be exposed due to fraudulent, negligent or unauthorised actions of financial market participants.
Financial market participants under our supervision are assigned to one of four categories in descending order of supervision priority, i.e. the highest-priority financial market participants are assigned to the first category, the lowest-priority – to the fourth category.
A financial market participant is assigned to a category taking into account its size, systemic importance, uniqueness and other quantitative and qualitative indicators; all these indicators serve as a basis for the econometric model. Based on this model, an importance rank of financial market participants is established and a category is assigned. With regard to this, the Supervision Service of the Bank of Lithuania draws a priority and risk map, which is updated on a regular basis.
Appeal against supervision-related decisions of the Bank of Lithuania.
Decisions and actions (omissions) of the Bank of Lithuania that are related to financial market supervision may be appealed by persons whose rights or legally protected interests have been violated to the Regional Administrative Court (Žygimantų g. 2, 01102 Vilnius) in accordance with the procedure laid down in the Republic of Lithuania Law on Administrative Proceedings.
