Banks, Financial Services, Lithuania, Security

In late December, the central Bank of Lithuania for the first time set the minimum requirement for own funds and eligible liabilities (MREL) for the three banks, the central bank said. They will need to accumulate additional 601 mln euros for that purpose to ensure that the total amount of own funds and liabilities reaches 2.134 bn euros (11.2% of the three banks' own funds and liabilities).

"It's a significant event for the Lithuanian financial system since after a certain transitional period, Lithuania's major banks could be reorganized in case of a crisis without the need to use taxpayers' money since the banks' shareholders and other major creditors would cover losses," Tomas Garbaravicius, a board member of the Bank of Lithuania, said in a statement.

Swedbank and SEB will have to accumulate the additional funds and liabilities over the course of 2020, and Siauliu Bankas is required to do so by the end of 2023.

According to the Bank of Lithuania, all banks believe they will have no difficulties in implementing these goals, and the easiest way for the two major banks to do so would be to issue subordinated liabilities to their main banks.

The new requirements are aimed at covering a bank's losses and restoring capital to ensure that the bank can continue its operations and perform functions important for the country's economy.