## 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](https://www.imf.org/en/publications/cr/issues/2016/12/31/republic-of-lithuania-financial-system-stability-assessment-update-21910)

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## Bibliographic details
- Published: April 22, 2008
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451824162.002

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### 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).*

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/republic-of-lithuania-financial-system-stability-assessment-update-21910_