OREANDA-NEWS. October 04, 2010.
1.
Regarding violations of restrictions on credit union lending to their management members and related persons
Under the existing law on credit unions, a general total loan amount to one manager of a credit union and a related person cannot exceed 10 per cent of the credit union’s recalculated capital, reported the press-centre of Bank of Lithuania.

The provision of the amended law on credit unions is in force since 1 January 2009. Credit unions were given twelve months to make necessary changes to meet the new requirements. However, some of the credit unions have failed to meet the set deadline. The Board of the Bank of Lithuania discussed 11 such cases and decided to apply statutory enforcement measures.

As a result, Radviliskis credit union was imposed a fine of 0.1 per cent of its total annual earnings in 2009.

The decision on applying an enforcement measure was taken on the grounds that the credit union has ignored the above specified restriction for a long time and that the Bank of Lithuania had previously imposed an enforcement measure upon the same credit union for the violations of requirements associated with legal acts regulating safe and secure operations of credit unions.

The following 10 credit unions have been issued warnings regarding violations of restrictions on credit union lending to management and related persons:

Sostines kreditas (Vilnius), Suduvos parama (Marijampole), Sveikatos kreditas (Vilnius), credit unions in Utenos, Kaunas archdiocese, Ukininku taupa (Sirvintos), Zemdirbio gerove (Siauliai), credit unions in Vilkaviskis, Klausuciai (region of Jurbarkas ), Alytus.

2.
Permission to register amendments to the articles of association of AB Ukio bankas
The Board of the Bank of Lithuania permitted AB Ukio bankas to register amendments to its Articles of Association related to the rights granted by shares and the competence of the Bank, that were approved during the general meeting of the Shareholders on 26 March 2010.

A number of amendments were made to harmonize the Bank’s Articles of Association with the amendments to provisions in the Company Law of the Republic of Lithuania. The shareholders’ meeting approved of amending the Articles of Association by specifying that the head of the Bank administration will have at least one deputy. Also, a revised list of financial services to be provided by the Bank was produced:

under the amendment made to the Law of the Republic of Lithuania on Financial Institutions, the Articles of Association have been amended too to allow the bank to provide payment services in addition to financial services; as the licence issued by the Bank of Lithuania to Ukio bankas does not limit trade in precious metals respective adjustments have been made to the provisions contained in the Articles of Association, by allowing the bank to conclude precious metals transactions on its own account or account of its clients.
 
3.
On amendments to Resolution No. 149 of 25 September 2008 of the Bank of Lithuania On the Provisions for the Organisation of Internal Control and Risk Assessment (Management)

The Board of the Bank of Lithuania made amendments to the Provisions for the Organisation of Internal Control and Risk Assessment (Management) to ensure effective operation of the internal control system and risk assessment (management) and to guarantee safe and stable activities of these systems.

The amendments were made taking into account the new documents published by the Committee of European Banking Supervisors (CEBS).

In view of increasing importance of risk factor, changes were made to the wording of prudential requirements concerning concentration risk in the Provisions for the Organisation of Internal Control and Risk Assessment (Management).

Two-level concentration risk management in a bank has been established: the level of concentration risk management inside other types of risks, and the level of concentration risk management among different types of risks, taking into account the most significant correlations between concentration risk factors. Special attention should be given to the assessment of credit risk concentration level by certain clients, products, sectors of economic activity or geographical position.

Some new requirements have been added concerning credit risk management through limiting large exposures with the focus on supplementing the list of criteria for identification of interrelated client groups by stating that any client group will be considered interrelated and considered one client not only in case when the control of the capital share held is identified, but also in case the linkage is based on economic interdependence of clients (such as dependence on the same recourses or the same key customers) or a single major source of financing.

Furthermore, changes were made to the wording of liquidity risk management requirements on the grounds that banks will have to form liquidity reserves the size and composition of which would allow them to survive in case of adverse market conditions for at least one month without making changes to their business model, and ensuring liquidity counterbalancing capacity which is considered a plan for ensuring required financing that will allow to proceed with the planned business activities and strategies for a longer period, as provided for in the Rules for the Calculation of Liquidity Ratio which were approved this year.