Banks, Financial Services, Lithuania

The Cabinet approved on Wednesday draft amendments to the Law on Banks allowing the Bank of Lithuania to evaluate banks' transactions in light of the risks they pose. 

The amendments, drafted by the Finance Ministry, have yet to be adopted by the Seimas.

Under the current law, the central bank's clearance is necessary for a merger of banks, but this can be avoided in deals where, for example, a bank acquires control of another bank or where one of them sells its assets, Algirdas Prapiestis, the chief economist at the Bank of Lithuania's Macro-Prudential Policy Division, told LETA/BNS in a comment. 

If passed, the amendments will allow the central bank "to identify potential systemic risk changes in advance and, if needed, take steps to stop them", he said. 

Under the amendments, the central bank's clearance would have to be obtained before merging banks, acquiring a large part of a bank's assets if its share of the total bank system increases by more than 1 percentage point, and the purchase of a qualified share of the authorized capital of a bank by another bank. 

The Finance Ministry says the level of concentration in the Lithuanian bank system is currently the third-largest in the EU after Estonia and Greece. 

According to the Bank of Lithuania, Swedbank and SEB in late December held a combined share of 62% of the total bank assets, 60% of loans and 65% of deposits.

If passed by the Seimas, the amendments will take effect on July 1.