Republic of Lithuania: Financial System Stability Assessment: Update
IMF Staff Country Reports, April 22, 2008
Source details
- Canonical URL
- Republic of Lithuania: Financial System Stability Assessment: Update
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Bibliographic details
- Published: April 22, 2008
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451824162.002
Overview
- Lithuania’s catch-up toward the European average has been impressive.
- This success has been coupled with the emergence of macroeconomic imbalances.
- The dominance of foreign-owned banks in the banking system constitutes both a source of strength and risk.
- The government implemented a regulatory framework for Nonbank Financial Institution (NBFI) and a pension reform.
Key findings
- Banking system resilience:
- Stress tests indicate that the banking system is reasonably resilient to macroeconomic shocks.
- Existing capital buffers might not be sufficient to cope with low probability extreme events, and strengthening the capital would be advisable.
- Structural and institutional developments:
- Dominance of foreign-owned banks is a central feature of the financial system, representing cross-border linkages and attendant risks.
- Regulatory advances include a framework for Nonbank Financial Institution (NBFI).
- Pension system reform has been implemented.
Subject areas and keywords (as presented)
- Subject: Banking, Commercial banks, Credit risk, Expenditure, Financial institutions, Financial regulation and supervision, Financial sector policy and analysis, Foreign banks, Pension spending, Stress testing
- Keywords: bank, banking sector, BoL, capital base, Commercial banks, CR, Credit risk, entity basis, Foreign banks, Global, IRB model, ISCR, liquidity position, parent bank, Pension spending, presents challenge, Stress testing
Policy implications and recommendations
- Strengthen capital buffers in the banking system to improve resilience against low probability extreme events.
- Continue to monitor and manage risks associated with the dominance of foreign-owned banks, including parent-bank linkages and cross-border exposures.
- Consolidate and supervise the newly implemented regulatory framework for NBFIs to ensure sector stability.
- Monitor the fiscal and financial implications of the pension reform and pension spending.
Republic of Lithuania: Financial System Stability Assessment: Update (April 22, 2008).