OFFICIAL TRANSLATION REPUBLIC OF LITHUANIA LAW ON BANKS 30 March 2004 No. IX-2085 Vilnius CHAPTER I GENERAL PROVISIONS Article

1. Purpose of the Law
2. The purpose of this Law shall be to regulate the procedure for setting up, licensing, pursuing of business, terminating and restructuring as well as supervising of Lithuanian commercial banks and specialised banks as well as foreign banks operating in the Republic of Lithuania, including establishments thereof, in order to ensure a stable, sound, efficient and safe banking system.
3. This Law shall implement the legal acts of the European Union listed in the Annex to this Law. Article
4. Definitions
5. “Bank” shall mean a commercial bank and a specialised bank.
6. “Banking licence” (hereinafter referred to as “licence”) shall mean an authorisation granted to a bank according to the procedure set forth by this Law to engage in the provision of licensed financial services.
7. “Financial services” shall mean the services referred to in paragraph 1 of Article 3 of the Law on Financial Institutions.
8. “Heads of a legal person” shall mean members of bodies of legal persons with the exception of the meeting of members.
9. “Commercial bank” shall mean a credit institution set up in the Republic of Lithuania which is authorised to engage in receiving of deposits and other repayable funds from non-professional participants of the market and in lending thereof and engages therein, has the right to provide other financial services and assumes the risk and liability related thereto.
10. “Licensed financial services” shall mean: 1) receipt of deposits or other repayable funds from non-professional participants of the market; 2) money transfer; 3) issuing and administering of electronic money; 4) other financial services subject to a licence issued in accordance with other laws of the Republic of Lithuania.
11. “Specialised bank” shall mean a credit institution set up in the Republic of Lithuania which has been authorised to provide one or several, but not all, licensed financial services referred to in subparagraphs 1-3 of paragraph 6 of this Article or the number of persons to whom licensed financial services can be provided is limited by the issued licence.
12. “Foreign bank” shall mean a credit institution set up in a foreign state which holds an authorisation or licence issued by the supervisory institution of the foreign state to engage in receiving of deposits and other repayable funds from non-professional participants of the market and lending thereof or in the provision of other licensed financial services and is engaged therein.
13. Other concepts used in this Law shall be interpreted as they are defined in the Law on Financial Institutions. Article
14. Name, Legal Form and Registered Office of a Bank, Legal Acts Regulating Banking Activities
15. The word "bank" or other combinations or derivatives thereof may be used in the Republic of Lithuania only by the persons operating in accordance with this Law in their name or for advertising or other purposes, except where the use of this word is evidently unrelated to the provision of licensed financial services.
16. Paragraph 1 of this Article shall not be applied where the name of a legal person has been laid down by a law of the Republic of Lithuania regulating its activities.
17. The legal form taken by a bank as a legal person may only be a public limited liability company or a private limited liability company.
18. The registered office of a public limited liability company or a private limited liability company holding a licence issued according to the procedure set forth by this Law and registered in the Republic of Lithuania Register of Legal Persons must be in the Republic of Lithuania.
19. Banks shall act in compliance with the Constitution of the Republic of Lithuania, the Civil Code, this Law, legal acts adopted by supervisory institutions and their statutes (articles of association) (hereinafter referred to as “articles of association”). Banks shall also act in compliance with the Law on Financial Institutions, the Law on Companies and other legal acts, except where this Law provides otherwise. Article
20. Financial Services Provided by a Bank and Other Activities
21. The right to engage in receiving of deposits or other repayable funds from non-professional participants of the market according to the procedure set forth by this Law shall only be vested in: 1) the banks holding a licence which grants such a right; 2) branches of foreign banks holding a licence which grants such a right; 3) foreign banks which are licensed in the Member States of the European Union and in the states of the European Economic Area (hereinafter referred to as “the Member States of the European Union”) and which have the right to engage in receiving of deposits or other repayable funds from non-professional participants of the market in the state concerned, have set up branches in the Republic of Lithuania according to the procedure set forth by this Law or provide financial services without setting up a branch.
22. A bank shall have the right to provide all financial services, including financial services in a foreign currency, except where this right is restricted by this Law and other laws.
23. In addition to the provision of financial services, a bank may pursue only such other activities as those in the absence of which financial services cannot be provided, which assist in the provision of the financial services or are otherwise directly related to the provision of the financial services.
24. Where a bank itself decides not to carry on a certain activity in the absence of which financial services cannot be provided, which assists in the provision of financial services or is otherwise directly related to the provision of financial services and to conclude transactions with other persons on the provision of respective services to the bank (hereinafter referred to as “the purchase of ancillary banking services”), the bank must notify thereof the supervisory institution and provide to it the information laid down by legal acts of the supervisory institution prior to concluding the said transactions. The legal acts of the supervisory institution may set the requirements for the purchase of the ancillary banking services.
25. A specialised bank authorised only to issue and administer electronic money may provide only such other non-licensed financial services and pursue only such other activities as those in the absence of which electronic money cannot be issued and administered or which assist in the issuing and administering thereof or are otherwise directly related to the issuance and administration of electronic money, also store data on an electronic media on behalf of other legal persons. Moreover, the said specialised bank shall have the right to issue payment cards and other means of payment and to carry out operations therewith, however, when providing this financial service, the bank shall not have the right to grant any form of credit.
26. Prior to taking decisions which restrict a bank’s freedom to dispose of the funds in its account or which otherwise restrict the right of the bank to provide financial services to the bank’s clients, court of the Republic of Lithuania and other institutions or officials stipulated by laws must obtain a conclusion of the supervisory institution on the influence of these decisions on the stability and soundness of the whole system of banks. Article
27. Articles of Association of a Bank
28. The articles of association of a bank being established and amendments to the articles of association of the bank shall become invalid where they are not submitted to the Register of Legal Persons within 12 months accordingly of the signing of the articles of association or of the taking of a decision on the amendment of the articles of association of the bank at the general meeting of the shareholders.
29. Amendments to the articles of association of a bank may be registered in the Register of Legal Persons only upon obtaining an authorisation of the supervisory institution, where the provisions of the articles of association are amended in respect of: 1) the name or registered office of the bank; 2) the amount of the authorised (share) (hereinafter referred to as “authorised”) capital; 3) the number of shares and their number according to class, their nominal value and the rights attaching to them; 4) the powers of the bank’s bodies, procedure for electing and removing from office their members.
30. An authorisation to register amendments to articles of association of a bank shall be granted by the supervisory institution according to the procedure set forth this Law and legal acts of the supervisory institution.
31. In order to obtain an authorisation to register amendments to articles of association, a bank shall submit to the supervisory institution an application and other documents and data specified by legal acts of the supervisory institution. Where amendments to the articles of association of the bank are related to the increase of the authorised capital of the bank by issuing new shares, the documents and data referred to in subparagraphs 6 and 7 of paragraph 2 of Article 8 of this Law shall be submitted.
32. The supervisory institution must examine submitted documents and decide on the granting of an authorisation to register amendments to articles of association of a bank within 30 days of the receipt of the application or, where the amendments to the articles of association of the bank are related to the increase of the authorised capital of the bank by issuing new shares, within 2 months of the receipt of the application.
33. Where amendments to articles of association are related to the increase of authorised capital and upon increasing the authorised capital a person will acquire a qualifying holding in the bank’s authorised capital and/or voting rights or will increase it so that an authorisation of the supervisory institution will be required, the documents and data referred to in Article 25 of this Law must be submitted together with an application for the granting of an authorisation to register the amendments to the articles of association, and the person must obtain an authorisation of the supervisory institution to acquire a qualifying holding in the bank’s authorised capital and/or voting rights. Applications submitted in this case shall be examined and decisions shall be taken within the time limits laid down in Article 25 of this Law.
34. The supervisory institution may refuse to grant an authorisation to register amendments to articles of association of a bank, where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) upon making the amendments, provisions of the articles of association of the bank will not ensure safe and sound activities of the bank or will not be in conformity with the relevant legal acts; 3) upon increasing the authorised capital by issuing new shares, the bank’s shares have not been fully paid-up in the prescribed manner or the bank’s shareholders, including those acquiring a qualifying holding in the bank’s authorised capital and/or voting rights, do not meet the requirements set.
35. The supervisory institution shall give written notice to the Register of Legal Persons of the taking of a decision to grant or not to grant an authorisation to register amendments to articles of association of a bank within 5 working days of the taking of the decision. CHAPTER II ESTABLISHMENT AND LICENSING OF A BANK, FINANCIAL UNDERTAKINGS CONTROLLED BY A BANK, A BANK’S BRANCHES AND REPRESENTATIVE OFFICES Article
36. Procedure for Establishing a Bank
37. A bank shall be established according to the procedure set forth by the Civil Code, the Law on Financial Institutions, this Law and, except where this Law provides otherwise, the Law on Companies.
38. A bank may only be established for an indefinite period of time.
39. A bank may be registered upon obtaining an authorisation of the supervisory institution to establish the bank.
40. Shares of a bank being established must be fully paid-up prior to the convening of the statutory meeting. Article
41. Founders
42. A bank may be established by not less than 10 founders.
43. Paragraph 1 of this Article shall not be applied where one of the founders of a bank is a Lithuanian or foreign financial institution or insurance undertaking and acquires more than 2/3 of the bank’s voting shares.
44. Each founder of a bank must acquire not less than 3 per cent of the bank’s voting shares.
45. The persons who may not be founders of a financial institution pursuant to the Law on Financial Institutions and the persons who may not be shareholders of a bank pursuant to this Law may not be founders of a bank. Article
46. Authorisation to Establish a Bank
47. An authorisation to establish a bank shall be granted by the supervisory institution according to the procedure set forth by laws and legal acts of the supervisory institution.
48. In order to obtain an authorisation to establish a bank, founders of the bank shall submit to the supervisory institution an application and the documents and data specified by legal acts of the supervisory institution, including: 1) the memorandum of the bank; 2) articles of association of the bank; 3) minutes of the statutory meeting and list of participants of the meeting; 4) a framework for activities of the bank; 5) documents and data on the identities of the founders of the bank and the proportion of the bank’s authorised capital and/or voting rights being acquired by each one of them as well as the documents and data evidencing that the funds used for the acquisition of the proportion of the bank’s authorised capital and/or voting rights have been obtained legitimately; 6) documents and data on the founders of the bank who acquired a proportion of the bank’s authorised capital and/or voting rights reaching or exceeding 5 per cent, including data on their financial situation, on the proportion held in other legal persons’ authorised capital and/or voting rights and on the members of the founders (legal persons) holding a qualifying holding in the founder’s authorised capital and/or voting rights; 7) the documents proving that shares of the bank have been fully paid-up; 8) a list of heads of the bank elected by the statutory meeting whose election or appointment is subject to an authorisation of the supervisory institution.
49. Where a founder acquires a qualifying holding in the bank’s authorised capital and/or voting rights, the documents and data referred to in Article 25 of this Law shall be additionally submitted, and an authorisation of the supervisory institution to acquire a qualifying holding in the bank’s authorised capital and/or voting rights must be obtained.
50. The supervisory institution must examine the submitted documents and take a decision on the granting of an authorisation to establish a bank within 3 months of the receipt of an application.
51. The supervisory institution may refuse to grant an authorisation to establish a bank where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) provisions of the articles of association of the bank do not ensure safe and sound activities of the bank or are not in conformity with the relevant legal acts; 3) the legal form, founders of the bank being established, heads of the bank, minimum capital of the bank do no meet the requirements set by laws.
52. The supervisory institution shall give written notice to the Register of Legal Persons of a decision to grant or not to grant an authorisation to establish a bank.
53. Upon granting an authorisation to establish a bank and until issuing to the bank a licence, a founder (shareholder) of the bank shall be prohibited from selling or otherwise transferring the shares acquired by him and set out in the memorandum, and the bank shall be prohibited from issuing new shares or otherwise changing the size of the authorised capital or composition of founders provided for by the memorandum.
54. The supervisory institution shall withdraw an authorisation to establish a bank prior to the establishment of the bank where: 1) the authorisation has been obtained fraudulently or otherwise breaching laws; 2) upon the expiry of the time limit laid down in paragraph 1 of Article 5 of this Law, articles of association of the bank being established become invalid.
55. The supervisory institution shall give written notice to founders and the Register of Legal Persons of a decision to withdraw an authorisation to establish a bank within 3 working days. Article
56. Licence
57. When issuing a licence, the supervisory institution may restrict the right of a bank to provide one or several licensed financial services where this is requested by the bank or where it is not prepared to provide all licensed financial services. Restrictions on the provision of licensed financial services shall be removed where the bank submits an application and the documents and data evidencing that the bank is prepared to provide all licensed financial services.
58. A licence shall be issued for an indefinite period of time.
59. A bank shall be prohibited from transferring the rights granted by a licence or otherwise permit another person to provide licensed financial services not on behalf of the bank and not for the benefit of the bank.
60. A licence shall be issued to a bank registered in the Register of Legal Persons by the supervisory institution in accordance with the procedure set forth by laws and legal acts of the supervisory institution.
61. In order to obtain a licence, a bank shall submit to the supervisory institution an application, the documents and data specified by legal acts of the supervisory institution, including: 1) registered articles of association of the bank and certificate of registration; 2) documents proving that the bank has the minimum capital of a bank laid down by this Law; 3) a list of shareholders of the bank specifying the proportion of the bank’s authorised capital and/or voting rights acquired by each one of them; 4) upon the establishment of the bank, a list of elected (appointed) heads of the bank whose election or appointment is subject to an authorisation of the supervisory institution; 5) an operating plan of the bank for the first three years; 6) a description of the management and organisational structure; 7) a draft of the accounting policy and a detailed description of the accounting organisation; 8) documents and information evidencing that the bank has internal control system, personnel, technical, information and technological security means, premises and insurance of property ensuring safe and sound activities of the bank; 9) conclusions, authorisations or other documents issued by other State institutions on the preparedness to provide licensed financial services where this is required by other laws.
62. The supervisory institution shall have the right to carry out on-the-spot verification of the preparedness of a bank applying for the issuance of a licence to provide financial services.
63. Upon the request of the supervisory institution, State and municipal institutions as well as other persons must forthwith supply available information on founders, shareholders and heads of a bank, their financial situation, activities, discovered infringements of laws and other legal acts, conclusions of conducted verifications and examinations as well as other information required by the supervisory institution for the taking of a decision on the issuance of a licence.
64. The supervisory institution must examine submitted documents and take a decision on the issuance of a licence not later than within 3 months of the receipt of the application. Where the supervisory institution requests additional documents or data, the decision must be taken within 3 months of the receipt of the additional documents and data. A decision on the issuance of a licence shall, in any case, be taken within 12 months of the receipt of the application.
65. Articles of association, an operating plan, management and organisational structure, accounting organisation, internal control system, technical, information and technological security means, premises, insurance of property of a bank applying for a licence must ensure safe and sound activities of the bank and comply with the relevant legal acts. The bank must also meet the requirements set by this Law, including the requirements set for the legal form, minimum capital of the bank, requirements for the registered office, shareholders of the bank, including the shareholders who have acquired a qualifying holding in the bank’s authorised capital and/or voting rights, heads of the bank, and must be prepared to safely and soundly provide financial services.
66. The supervisory institution may refuse to issue a licence where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a bank does not meet the requirements set in paragraph 9 of this Article; 3) close links exist between the bank and other person, which would prevent the supervisory institution from effectively exercising the supervision of the bank; 4) close links exist between the bank and a person from a state other than a Member State of the European Union whose legal acts governing the activities of this person or difficulties in ensuring compliance with the said legal acts may prevent the supervisory institution from effectively exercising the supervision of the bank.
67. Close links shall be considered to exist between two or more persons where they are linked by: 1) direct or indirect ownership (by way of control of a proportion of the authorised capital and/or voting rights granting the right to control the activities and management of an undertaking) of 20 per cent or more of the undertaking’s authorised capital and/or voting rights or other real possibility to exercise influence over decisions on the activities of the undertaking; or 2) ownership of a proportion of the authorised capital and/or voting rights granting the right to control the activities of an undertaking; or 3) one and the same third party controlling their proportions of the authorised capital and/or voting rights granting the right to control the activities of an undertaking.
68. A decision taken to issue or not to issue a licence shall be notified to the Register of Legal Persons in accordance with the provisions of this Register and published in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios.
69. A bank shall have the right to commence the provision of financial services only upon the issuance of a licence.
70. A bank holding a licence must always meet with the requirements set to obtain the licence. In the cases and according to the procedure set forth in this Law and legal acts of the supervisory institution, the bank must notify the supervisory institution of any changes in the data submitted to obtain the licence. Article
71. Withdrawal of a Licence
72. The grounds for the withdrawal of a licence shall be laid down by the Law on Financial Institutions. In addition to the grounds laid down in paragraph 2 of Article 10 of the Law on Financial Institutions, a licence may be withdrawn by a decision of the supervisory institution where: 1) a bank does not meet the requirements set for the granting of an authorisation to establish a bank or for the issuance of a licence; 2) a bank ceases to exist due to reorganisation or a decision is taken on liquidation thereof; 3) a bank does not pay in the first (advance) insurance premium in accordance with the Law on Insurance of Deposits and Liabilities to Investors where it must pay it or where insurance is terminated.
73. Withdrawal of a licence or suspension of validity thereof shall be notified to the bank and the Register of Legal Persons in the manner prescribed by provisions of this Register and published in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios.
74. Reasons must be given for a decision of the supervisory institution on the withdrawal of a licence.
75. A licence may also be withdrawn or validity thereof suspended on the grounds and according to the procedure set forth in Chapter 10 of this Law.
76. Upon the withdrawal of a licence, a bank shall not have the right to provide financial services, except to the extent it is necessary to settle with the bank’s creditors, and a decision must be taken on the liquidation of the bank or opening of bankruptcy proceedings according to the procedure set forth in Chapters 11 and 12 of this Law. Article
77. Branches and Other Establishments of a Bank in the Republic of Lithuania
78. Articles of association of a bank, management and organisational structure, accounting organisation, security means, premises and insurance of property of a branch and other establishments of the bank providing financial services must ensure safe and sound activities of the bank and be in compliance with the relevant legal acts.
79. All establishments of a bank providing financial services must have communication facilities to transmit information on the operations carried out to the registered office of the bank in real time.
80. Upon the setting up of a branch or another establishment providing financial services, a bank must, within 15 days of its establishment, notify thereof the supervisory institution and submit to the supervisory institution the information and documents specified by legal acts. In the event of a change in any of the particulars communicated, the bank must, within 15 days of the change, notify thereof the supervisory institution and submit to the supervisory institution the information and documents specified by legal acts. Article
81. Representative Office of a Bank
82. A bank shall have the right to establish a representative office in the Republic of Lithuania and in foreign states.
83. A representative office of a bank shall not have the right to provide financial services.
84. Upon the establishment of a representative office, a bank must, not later than within 15 days of its establishment, notify thereof the supervisory institution and submit to the supervisory institution the information and documents specified by legal acts. In the event of a change in any of the particulars communicated, the bank must, within 15 days from the day of the change, notify thereof the supervisory institution and submit to the supervisory institution the information and documents established by legal acts. Article
85. Banks and Branches Thereof in Foreign States
86. A bank shall have the right to establish a bank in a foreign country, acquire a qualifying holding in the authorised capital and/or voting rights of a foreign bank or increase it so that the foreign bank would become controlled by it or establish a branch in a foreign state only upon obtaining an authorisation of the supervisory institution.
87. An authorisation to establish a bank in a foreign country, acquire a qualifying holding in the authorised capital and/or voting rights of a foreign bank or increase it so that the foreign bank would become controlled by it or establish a branch in the foreign country shall be issued by the supervisory institution according to the procedure set forth by laws and legal acts of the supervisory institution.
88. For an authorisation to be granted to establish a bank in a foreign country, acquire a qualifying holding of the authorised capital and/or voting rights of a foreign bank or increase it so that the foreign bank would become controlled by it, an application and the documents and data specified by legal acts of the supervisory institution as well as data on the founders (members) of a bank being established or of a bank whose part of the authorised capital and/or voting rights is acquired who hold a qualifying holding in the foreign bank’s authorised capital and/or voting rights, the financial situation, operating plan, organisational and management structure and heads of the bank shall be submitted.
89. For an authorisation to be granted to establish a branch in a foreign country, an application and the documents and data specified by legal acts of the supervisory institution as well as the documents and data evidencing that the branch meets the requirements set in paragraph 1 of Article 11 of this Law shall be submitted.
90. Upon the receipt of an application referred to in paragraphs 3 and 4 of this Article, the supervisory institution shall request the supervisory institution of the foreign state wherein a bank is being established or under whose jurisdiction a bank falls, where a proportion of the bank’s authorised capital and/or voting rights is being acquired, or wherein a branch of the bank is being established to provide information on the procedure for supervising banks and the requirements set for banks in that state as well as capabilities of the supervisory institution of the Republic of Lithuania to exercise its supervisory functions and obtain the required information, including the information required for the exercise of supervision on a consolidated basis.
91. The supervisory institution must examine submitted documents and take a decision on the granting of an authorisation within 3 months of the receipt of the application.
92. The supervisory institution may refuse to grant the authorisation referred to in this Article where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a bank being established or a bank whose proportion of the authorised capital and/or voting rights is being acquired or a branch being established do not meet the requirements set by the supervisory institution or where such an establishment of the bank or of the branch or acquisition of the proportion of the bank’s authorised capital and/or voting rights may pose a threat to the safety and soundness of activities of the bank; 3) information requested according to paragraph 5 of this Article is not received from the supervisory institution of a foreign country or it is possible to draw a conclusion on the basis of the submitted information that legal acts of the foreign state do not provide for a sufficient supervision of banks or restrict rights of the supervisory institution when exercising its supervisory functions and obtaining the required information, including the information required for the exercise of supervision on a consolidated basis.
93. In the cases and according to the procedure set forth by this Law and legal acts of the supervisory institution, a bank must notify the supervisory institution of any changes in the data submitted to obtain the authorisations referred to in this Article.
94. Where the supervisory institution establishes that after the granting of the authorisations referred to in this Article, circumstances may arise which would preclude the granting of an authorisation, the supervisory institution shall have the right, according to the procedure set forth in Chapter 10 of this Law, to take a decision on the prohibition of the activities of a branch, obligation to sell or otherwise transfer a proportion of the authorised capital and/or voting rights of a foreign bank and imposition of other sanctions to the bank.
95. This Article shall not be applied where a bank establishes a controlled bank in a Member State of the European Union, acquires a proportion of the authorised capital and/or voting rights of a foreign bank falling under the jurisdiction of a Member State of the European Union, establishes a branch in a Member State of the European Union or provides services without establishing the branch. Article
96. Right of a Bank to Provide Financial Services in the Members States of the European Union
97. A bank shall have the right to establish a branch in a Member State of the European Union according to the procedure set forth by this Article or provide financial services without establishing the branch.
98. Prior to establishing a branch in a Member State of the European Union, a bank shall notify thereof the supervisory institution by indicating the state in which it plans to establish a branch and submit the information specified by the supervisory institution on an operating plan of the branch to be established setting out, inter alia, the financial services to be provided, the organisational structure of the branch, the intended registered office (address) of the branch in the foreign state and the heads of the branch.
99. The supervisory institution must forward the information referred to in paragraph 2 of this Article and submitted by the bank as well as information on the bank’s equity capital and capital adequacy within 3 months to the supervisory institution of a foreign state. The supervisory institution shall have the right to refuse the forwarding of the information to the supervisory institution of the foreign state where the operating plan of a branch, organisational structure or heads thereof or the financial situation of the bank do not meet the requirements set by the supervisory institution to the activities envisaged. Reasons must be given for the refusal of the supervisory institution to forward the information, and a decision thereon must be taken within 3 months of the receipt of the information referred to paragraph 2 of this Article. The bank must be forthwith notified of the forwarding of the information or refusal to forward it to the supervisory institution of the foreign state.
100. Where a bank has already established at least one branch in a foreign state, the procedure set forth in this Article shall not be applied to the establishment of other branches thereof in that state.
101. In order to provide financial services in a foreign state without establishing a branch, a bank must notify thereof the supervisory institution. The bank must also submit an operating plan setting out, inter alia, the financial services to be provided. The supervisory institution must, within one month, forward or refuse to forward this information to the supervisory institution of a foreign country and notify thereof the bank.
102. In the event of a change in any of the particulars communicated to the supervisory institution when effecting the notification referred to paragraphs 2 or 5 of this Article, a bank must notify thereof the supervisory institution and the supervisory institution of a foreign country in advance, at least one month before making the change. The supervisory institution shall, within one month, forward the information on the planned changes to the supervisory institution of the foreign state or refuse to forward it where there are grounds referred to in paragraph 3 of this Law and notify thereof the bank. Upon the refusal of the supervisory institution to forward the information on the planned changes to the supervisory institution of the foreign state, the bank shall not have the right to effect these changes.
103. Legal acts of the supervisory institution may lay down the procedure for applying the provisions of this Article to a specialised bank authorised only to issue and administer electronic money. Article
104. Right of the Financial Undertakings Controlled by a Bank to Provide Financial Services in the Member States of the European Union
105. The right to establish a branch in a Member State of the European Union or provide financial services without establishing the branch according to the procedure set forth by Article 14 of this Law shall also be vested in a financial undertaking controlled by one or several banks and established in the Republic of Lithuania where according to legal acts of the Republic of Lithuania and establishment documents it has the right to engage in the provision of financial services and meets all of the following requirements: 1) the parent bank or banks of the financial undertaking hold a licence obtained according to the procedure set forth by this Law; 2) the financial undertaking is already engaged in the provision of the financial services in the Republic of Lithuania which are to be provided in the Member State of the European Union; 3) the parent bank or banks of the financial undertaking hold 90 per cent or more of the authorised capital and/or voting rights of the financial undertaking; 4) the parent bank or banks of the financial undertaking satisfy the supervisory institution regarding the prudent management of the controlled financial undertaking and have declared, with the consent of the supervisory institution, that the parent bank or banks of the financial undertaking jointly and severally guarantee the commitments entered into by the controlled financial undertaking; 5) the controlled financial undertaking is covered by the consolidated supervision of the parent bank or banks.
106. When effecting a notification pursuant to paragraph 3 of Article 14 of this Law, the supervisory institution shall indicate therein, inter alia, whether the controlled financial undertaking meets the requirements set in paragraph 1 of this Article and submit information on the equity capital of the financial undertaking and consolidated equity capital of the parent bank and of the entire financial group.
107. A financial undertaking which is the subject of a notification effected according to the procedure set forth by this Article must submit to the supervisory institution the information specified by legal acts thereof and required to supervise the compliance with terms and conditions set in this Article. After the effecting of the notification, the capital of the financial undertaking may not be reduced, and the undertaking must ensure adequate management and organisational structure, accounting organisation and internal control system. Moreover, the supervisory institution shall have the right to inspect the financial undertaking according to the procedure set forth by this Law and to impose to it administrative penalties in accordance with the Code of Administrative Offences. Where the controlled financial undertaking no longer meets at least one requirement set in paragraph 1 of this Article, the supervisory institution shall notify thereof the supervisory institution of a foreign state. CHAPTER III ACTIVITIES OF FOREIGN BANKS IN THE REPUBLIC OF LITHUANIA Article
108. Activities of Foreign Banks in the Republic of Lithuania
109. Foreign banks may, according to the procedure set forth by this Law, establish banks in the Republic of Lithuania, acquire a proportion of the authorised capital and/or voting rights of the banks in operation and establish branches and representative offices; the foreign banks licensed in the Member States of the European Union shall also have the right to provide financial services without establishing a branch in the Republic of Lithuania pursuant to Article 20 of this Law.
110. A branch of a foreign bank may be established in the Republic of Lithuania according to the procedure set forth by this Law only upon obtaining an authorisation to establish the branch of the foreign bank. The branch of the foreign bank may commence the provision of financial services in the Republic of Lithuania only upon obtaining of a licence according to the procedure set forth by this Law.
111. Paragraph 2 of this Law shall not apply to the foreign banks licensed in the Member States of the European Union and establishing a branch in the Republic of Lithuania according to the procedure set forth by Article 20 of this Law.
112. A representative office of a foreign bank may be established in the Republic of Lithuania according to the procedure set forth by this Law only upon obtaining an authorisation to establish the representative office of the bank. This provision shall not be applied to the foreign banks licensed in the Member States of the European Union.
113. The requirements set for banks under this Law shall be applied to branches and representative offices of foreign banks and to activities, supervision, termination and restructuring thereof to the extent that they do not contradict the essence of a branch or representative office and this Law does not provide otherwise.
114. A branch of a foreign bank established in the Republic of Lithuania, when providing financial services in a place other than the registered office of the branch, need not establish the branch therein. Where the foreign bank establishes more than one branch in the Republic of Lithuania, it must specify one branch which would provide the supervisory institution with the information on all branches established in the Republic of Lithuania as specified in this Law and legal acts of the supervisory institution.
115. Where legal acts of a state other than a Member State of the European Union under whose jurisdiction falls a foreign bank establishing a bank in the Republic of Lithuania, acquiring a qualifying holding in the bank’s authorised capital and/or voting rights or establishing a branch or representative office provide for additional or stricter, as compared with this Law, requirements and terms set for Lithuanian banks wishing to pursue business in that state on the establishment of a bank, acquisition of a qualifying holding in the bank’s authorised capital and/or voting rights or the establishment of a branch or representative office, the supervisory institution shall have the right to require that the foreign bank wishing to pursue business in the Republic of Lithuania meet the same requirements and terms. Article
116. Establishment of a Bank and Acquisition of a Qualifying Holding in the Bank’s Authorised Capital and/or Voting Rights
117. An authorisation to establish a bank in the Republic of Lithuania shall be granted to a foreign bank and a licence shall be issued to an established bank according to the procedure set forth by Articles 8 and 9 of this Law. A consent to acquire a qualifying holding in a bank’s authorised capital and/or voting rights shall be granted to a foreign bank according to the procedure set forth by Article 25 of this Law. In addition to the grounds laid down in Articles 8 and 25 of this Law, the supervisory institution may also refuse to grant the authorisation to establish the bank or the consent to acquire a qualifying holding in the bank’s authorised capital and/or voting rights on the grounds laid down in paragraph 4 of this Article.
118. Prior to taking decisions on the granting of an authorisation to a foreign bank to establish a bank or a consent to acquire a qualifying holding in the bank’s authorised capital and/or voting rights or to increase it, the supervisory institution shall inquire the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls whether it agrees that the foreign bank establishes a bank in the Republic of Lithuania or acquires a qualifying holding in the bank’s authorised capital and/or voting rights or increases it and request information on the equity capital and capital adequacy of the bank, operating plan, organisational and management structure and heads thereof, also information on requirements of the legal acts of that state set to foreign banks and on the procedure for exercising supervision of banks, including supervision on a consolidated basis, by the supervisory institution of the foreign state.
119. Opinion and information shall also be requested for of the appropriate institution of a foreign state exercising supervision of banks or other financial institutions or insurance undertakings in the cases where a bank whose establishment is subject to an authorisation or whose qualifying holding in the authorised capital and/or voting rights is acquired or increased is going to be: 1) controlled by a financial institution or an insurance undertaking licensed in a foreign state; 2) controlled by a foreign bank or by an undertaking controlled by a financial institution or an insurance undertaking licensed in a foreign state; 3) controlled by the same persons who control another foreign bank or a financial institution or an insurance undertaking licensed in a foreign state.
120. The supervisory institution may refuse to grant an authorisation to establish a bank or a consent to acquire a qualifying holding in the bank’s authorised capital and/or voting rights where: 1) the supervisory institution of a foreign state does not submit the requested information; 2) the supervisory institution of a foreign state objects to the establishment of a bank in the Republic of Lithuania by a foreign bank or acquisition of the qualifying holding in the bank’s authorised capital and/or voting rights or increase thereof or where the foreign state exercises insufficient supervision of banks, including supervision on a consolidated basis. Article
121. Granting of an Authorisation to Establish a Branch to a Foreign Bank
122. An authorisation to establish a branch of a foreign bank in the Republic of Lithuania shall be granted by the supervisory institution according to the procedure set forth by laws and legal acts of the supervisory institution.
123. In order to obtain an authorisation to establish a branch, a foreign bank shall submit an application and the documents and data specified by legal acts of the supervisory institution, including: 1) the foreign bank’s establishment documents, certificate of registration, licence or other documents granting the right to pursue the business of a credit institution; 2) decision of a body of the foreign bank to establish a branch in the Republic of Lithuania; 3) documents and data evidencing that the foreign bank meets the soundness criteria set by legal acts of the supervisory institution; 4) a framework for activities of the branch; 5) a written confirmation that the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls does not object to the establishment of the branch in the Republic of Lithuania and information of this supervisory institution on the procedure for supervising foreign banks in that state, including branches thereof in foreign states, and the requirements set for banks as well as the obligation to exercise supervision of the branch established in the Republic of Lithuania and to provide information to the Lithuanian supervisory institution; 6) a list of heads of the branch and other persons whose election or appointment is subject to an authorisation of the supervisory institution.
124. The supervisory institution must examine submitted documents and take a decision on the granting of an authorisation to establish a branch within 3 months of the receipt of the application.
125. The supervisory institution may refuse to grant an authorisation to establish a branch where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a foreign bank establishing a branch does not meet the soundness criteria set by legal acts of the supervisory institution or heads of the branch of the foreign bank do not meet the requirements set by the legal acts; 3) the supervisory institution of a foreign state under whose jurisdiction a foreign bank falls objects to the establishment of a branch in the Republic of Lithuania or where the procedure for supervising foreign banks in that state and the requirements set for banks do not adequately ensure safe and sound activities of the branch or may prevent the Lithuanian supervisory institution from exercising its functions; 4) the supervisory institution of a foreign state under whose jurisdiction a foreign bank falls, where the foreign bank establishes a branch thereof in the Republic of Lithuania, does not undertake to supervise the activities of the branch of the foreign bank in the Republic of Lithuania and provide information to the Lithuanian supervisory institution under the terms acceptable to it.
126. The supervisory institution shall give written notice to the Register of Legal Persons of a decision taken to grant or not to grant an authorisation to establish a branch. Article
127. Issuance of a Licence to a Branch of a Foreign Bank
128. A licence issued to a branch of a foreign bank shall be subject to the provisions of paragraphs 1-3 of Article 9 of this Law.
129. A licence shall be issued to a branch of a foreign bank registered in the Register of Legal Persons of the Republic of Lithuania by the supervisory institution according to the procedure set forth by laws and legal acts of the supervisory institution.
130. For a licence to be issued, an application and the documents and data specified by legal acts of the supervisory institution shall be submitted, including: 1) articles of association of a branch and certificate of registration; 2) a list of the heads of the branch appointed after the establishment of the branch and of other persons whose election or appointment is subject to an authorisation of the supervisory institution; 3) an operating plan of the branch for the first three years; 4) documents and data on the branch specified by subparagraphs 6-9 of paragraph 5 of Article 9 of this Law.
131. The supervisory institution shall have the right to carry out on-the-spot verification of the preparedness of a branch to commence the provision of financial services.
132. The supervisory institution must examine submitted documents and take a decision on the issuance of a licence within 3 months of the receipt of the application.
133. Regulations of a branch of a foreign bank, heads, operating plan, management and organisational structure, accounting organisation, internal control system, security means, premises and insurance of property thereof must ensure safe and sound activities of the branch and be in compliance with the relevant legal acts. The branch must also comply with other requirements set by this Law and be prepared to provide financial services in a safe and sound manner.
134. The supervisory institution may refuse to issue a licence where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a branch does not meet the requirements set in paragraph 6 of this Article.
135. A decision taken to issue or not to issue a licence shall be notified to the Register of Legal Persons according to the procedure set forth by this Register and published in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios.
136. A foreign bank which has been issued a licence must, under any circumstances, meet the requirements set to obtain the licence. In the cases and according to the procedure set forth by this Law and legal acts of the supervisory institution, the bank must notify the supervisory institution of any changes in the particulars submitted to obtain the authorisation to establish a branch and to obtain the licence.
137. A licence shall be withdrawn by a decision of the supervisory institution on the grounds and according to the procedure set forth by Article 10 of this Law, also where the bank which has established a branch is being wound up or bankruptcy proceedings have been opened against it. Article
138. Right of Foreign Banks Licensed in the Member States of the European Union to Establish a Branch in the Republic of Lithuania or to Provide Financial Services without Establishing the Branch
139. A foreign bank licensed in a Member State of the European Union may, according to the procedure set forth in this Article, establish a branch in the Republic of Lithuania or provide financial services without establishing the branch.
140. A foreign bank licensed in a Member State of the European Union may establish a branch in the Republic of Lithuania and provide the financial services which the foreign bank has the right to provide according to an authorisation granted or a licence issued to it by the supervisory institution of a foreign state where: 1) the supervisory institution has received from the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls a notification containing information on an operating plan of the branch setting out, inter alia, the financial services to be provided, the organisational structure of the branch, the intended registered office (address) of the branch in the Republic of Lithuania; the heads of the branch; the equity capital and capital adequacy of the bank; 2) a notification has been received from the supervisory institution on the preparedness to exercise supervision and, where necessary, information on the requirements set by legal acts for the protection of public interests and binding on the branch which is engaged in the provision of financial services in the Republic of Lithuania.
141. A branch of a foreign bank licensed in a Member State of the European Union may be established and commence its activities upon the receipt by the foreign bank of a notification referred to in subparagraph 2 of paragraph 2 of this Article, and where no notification is received – 2 months from the submission the information referred to in subparagraph 1 of paragraph 2 of this Article to the Lithuanian supervisory institution by the supervisory institution of the foreign state.
142. Where a foreign bank referred to in paragraph 1 of this Article has already established at least one branch in the Republic of Lithuania, the procedure set forth by this Article shall not be applied to the establishment of other branches thereof.
143. A foreign bank licensed in a Member State of the European Union may commence the provision of financial services in the Republic of Lithuania without establishing a branch one month from the submission of an operating plan of the foreign bank setting out the financial services to be provided to the Lithuanian supervisory institution by the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls.
144. In the event of a change in any of the particulars on the operating plan of a branch, the organisational structure of the branch, the office (address) of the branch in the Republic of Lithuania or the heads of the branch communicated to the supervisory institution pursuant to subparagraph 1 of paragraph 2 of this Article, a foreign bank must notify thereof the Lithuanian supervisory institution in advance, at least one month before making the change. A bank which provides services without establishing a branch must notify the Lithuanian supervisory institution of a change in its operating plan in advance, at least one month before making the change. Article
145. Activities Carried on in the Republic of Lithuania by the Financial Undertakings which are Controlled by the Foreign Banks Licensed in the Member States of the European Union
146. A financial undertaking which is controlled by one or several foreign banks licensed in a Member State of the European Union shall have the right to establish a branch in the Republic of Lithuania or provide financial services without establishing a branch according to the procedure set forth by Article 20 of this Law, provided it has the right to engage in the provision of financial service in compliance with legal acts of the foreign state and its establishment documents and fulfils all of the following conditions: 1) the parent bank or banks of the financial undertaking have obtained an authorisation to pursue the business of a credit institution in a foreign state whose legal acts regulate the activities of an controlled financial undertaking; 2) the financial undertaking is already engaged in a Member State of the European Union in the provision of the financial services to be provided in the Republic of Lithuania; 3) the parent bank or banks of the financial undertaking hold 90 per cent or more of the authorised capital and/or voting rights of the financial undertaking; 4) the parent bank or banks of the financial undertaking satisfy the supervisory institution of a foreign state regarding the prudent management of the controlled financial undertaking and have declared, with the consent of the supervisory institution of the foreign state, that the parent bank or banks of the financial undertaking jointly and severally guarantee the commitments entered into by the controlled financial undertaking; 5) the controlled financial undertaking is supervised by exercising the supervision of the parent bank or banks on a consolidated basis.
147. A financial undertaking referred to paragraph 1 of this Article may establish a branch or provide financial services in the Republic of Lithuania without establishing a branch where the supervisory institution of a foreign state, when effecting a notification pursuant to subparagraph 1 of paragraph 2 of Article 20 of this Law, indicates, inter alia, whether the controlled financial undertaking meets the requirements set in paragraph 1 of this Article and provides information on the equity capital of the financial undertaking and the consolidated equity capital of the parent bank and the entire financial group.
148. Where the supervisory institution of a foreign state notifies the Lithuanian supervisory institution that a controlled financial undertaking no longer satisfies at least one of the conditions referred to in paragraph 1 of this Article, the financial undertaking shall thereupon be applied all requirements set by laws of the Republic of Lithuania for the persons providing such financial services. Article
149. Representative Office of a Foreign Bank in the Republic of Lithuania
150. A representative office of a foreign bank shall not have the right to provide financial services in the Republic of Lithuania.
151. An authorisation to establish a representative office of a foreign bank in the Republic of Lithuania shall be granted by the supervisory institution according to the procedure set forth by laws and legal acts of the supervisory institution.
152. In order to obtain an authorisation to establish a representative office, a foreign bank shall submit an application and the documents and data specified by legal acts of the supervisory institution, including: 1) the establishment documents of the foreign bank, certificate of registration, licence or other documents granting the right to pursue the business of a credit institution; 2) a decision of the management body of the foreign bank to establish a representative office in the Republic of Lithuania; 3) a written consent of the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls to establish a representative office in the Republic of Lithuania.
153. The supervisory institution must examine submitted documents and take a decision on the granting of an authorisation to establish a representative office within 3 months of the receipt of the application.
154. The supervisory institution may refuse to grant an authorisation to establish a representative office where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a foreign bank establishing a representative office or the representative office does not meet the requirements set by legal acts of the supervisory institution; 3) the supervisory institution of a foreign state under whose jurisdiction the foreign bank falls objects to the establishment of a representative office in the Republic of Lithuania.
155. The supervisory institution shall give written notice to the Register of Legal Persons of the decision to grant or not to grant an authorisation to establish a representative office.
156. A representative office of a foreign bank, in the cases and according to the procedure set forth by legal acts of the supervisory institution, must give notice to the supervisory institution of the registration of the representative office in the Register of Legal Persons and of any changes in the particulars submitted to obtain an authorisation to establish the representative office. CHAPTER IV SHAREHOLDERS OF A BANK Article
157. Shareholders of a Bank
158. A bank must have at least 10 shareholders.
159. Paragraph 1 of this Article shall not be applied where one of a bank’s shareholders is a Lithuanian or foreign financial institution or an insurance undertaking and where it holds more than 2/3 of the bank’s voting shares or where the State becomes a shareholder of the bank according to the procedure set forth by Article 28 of this Law.
160. Shareholders of a bank may not be: 1) the legal persons financed from State or municipal budgets; 2) the persons who have not submitted, in the cases and according to the procedure set forth by legal acts, to the supervisory institution data on their identities, members, activities, financial situation, the heads of a legal person, the persons for whose benefit shares are acquired or the legitimacy of the acquisition of the funds used to acquire the bank’s shares or who have not proved the legitimacy of the acquisition of the funds used to acquire the bank’s shares; 3) the persons who object that the supervisory institution manages, in the cases and according to the procedure set forth by laws and other legal acts, their data required for the issuance of the licences and granting of the authorisations and consents provided for under this Law, including their personal data and information on a person’s previous convictions and health.
161. A bank must manage the list of the bank’s members (shareholders) according to the procedure set forth by the Law on Financial Institutions. The bank must notify the supervisory institution of every case when 5 per cent or more of the bank’s authorised capital and/or voting rights are acquired or when the qualifying holding in the bank’s authorised capital and/or voting rights is acquired (increased) or is disposed of within 10 days of the receipt of the mentioned information. Moreover, the bank must submit particulars of the list of the bank’s members (shareholders) to the supervisory institution within 10 days from the date of the annual general meeting of the shareholders or otherwise upon the request of the supervisory institution.
162. A bank’s shareholders must exercise their rights and perform their obligations in such a way as to ensure the stability and soundness of the bank’s activities. Article
163. Qualifying Holding in a Bank’s Authorised Capital and/or Voting Rights
164. A person wishing to acquire a qualifying holding of a bank’s authorised capital and/or voting rights or to increase it so that the proportion of the authorised capital and/or voting rights held by him would make up 1/5, 1/3 or 1/2 of the holding or so that the bank would become controlled by him must obtain prior consent of the supervisory institution.
165. When calculating a qualifying holding in a bank’s authorised capital and/or voting rights, the following shall be regarded as voting rights held by a person: 1) voting rights attaching to the bank’s shares owned by that person (except where they are lodged as security or a pledge contract provides for the transfer of the voting right in question to the pledgee); 2) voting rights held by the legal persons controlled by that person; 3) voting rights held by a third party with whom that person has concluded a voting agreement which obliges them to adopt a policy towards the management of the company in question for a period longer than one year; 4) voting rights transferred under an agreement by a third party to that person or to the legal person controlled by that person; 5) voting rights which that person or the persons referred to in subparagraphs 2–4 of this paragraph is entitled to acquire under an agreement according to which his/their own initiative alone is sufficient for the transfer of the voting right in question; 6) voting rights which that person has the right to exercise at his discretion under an authorisation; 7) voting rights attaching to the shares owned by third parties in their own name, but on behalf of that person; 8) voting rights attaching to the shares deposited with that person by the right of trust or on other grounds which that person can exercise at its discretion in the absence of other instructions.
166. Prior to reducing a qualifying holding in a bank’s authorised capital and/or voting rights so that the qualifying holding in the bank’s authorised capital and/or voting rights held by a person would fall below 1/10, 1/5, 1/3 or 1/2 of the holding or so that the bank would cease to be controlled by him, the person must notify thereof the supervisory institution.
167. The entire proportion of a bank’s authorised capital and/or voting rights held by a person who has acquired a qualifying holding in the bank’s authorised capital and/or voting rights or who has increased it without prior consent of the supervisory institution where such a consent was required or where the supervisory institution takes a decision on the suspension of the right to exercise the voting right shall be divested of the voting right at the general meeting of the bank’s shareholders. Article
168. Granting of a Consent to Acquire a Qualifying Holding in a Bank’s Authorised Capital and/or Voting Rights
169. A consent to acquire a qualifying holding in a bank’s authorised capital and/or voting rights shall be granted by the supervisory institution according to the procedure set forth by this Law and legal acts of the supervisory institution.
170. In order to obtain a consent of the supervisory institution to acquire a qualifying holding in a bank’s authorised capital and/or voting rights or to increase it, a person shall submit to the supervisory institution an application and the documents and data specified by legal acts of the supervisory institution, including: 1) documents and data on the person’s identity, and where the application is submitted by a legal person – additionally the documents and data on the identity of the persons holding the qualifying holding in the legal person’s authorised capital and/or voting rights and of the heads of the legal person; 2) documents and data evidencing that the person is of good repute. Where the shareholder is a legal person, documents and data shall be submitted to confirm that the heads of the legal person and the persons holding the proportion of the authorised capital and/or voting rights granting the right to control the legal person are of good repute (where the holding person is a legal person – heads thereof); 3) documents and data on the activities and financial situation of the person, including data on the holdings in the authorised capital and/or voting rights held by legal persons; 4) documents and data evidencing that the funds to pay for shares have been obtained legitimately.
171. Upon the request of the supervisory institution, State and municipal institutions as well as third parties must forthwith submit to it the information available on the persons acquiring a qualifying holding in a bank’s authorised capital and/or voting rights, their members, financial situation, activities, the heads of a legal person, discovered infringements of laws and other legal acts, conclusions of the verifications and internal audits carried out as well as other information required by the supervisory institution for taking a decision on the granting of a consent to acquire or to increase the qualifying holding in the bank’s authorised capital and/or voting rights.
172. The supervisory institution must examine submitted documents and take a decision on the granting of a consent within 3 months of the receipt of an application.
173. A bank’s shareholder holding a qualifying holding in the bank’s authorised capital and/or voting rights may only be a person: 1) who meets the requirements set by this Law for a bank’s shareholders and the requirements set by paragraph 1 of Article 7 of the Law on Financial Institutions; 2) who is of good repute. Where the shareholder is a legal person, the heads of the legal person and the persons holding the proportion of the authorised capital and/or voting rights granting the right to control the legal person must be of good repute (where the holding person is a legal person – heads thereof); 3) whose financial situation is sound and stable.
174. A person may not be regarded to be of good repute where he: 1) has been convicted of a serious or particularly serious crime provided for in the Criminal Code of the Republic of Lithuania or of a crime against property, property rights and property interests, economy and business practice, the financial system or of corresponding criminal acts under criminal laws of foreign states, irrespective of whether the conviction has expired; 2) has been imposed administrative, disciplinary penalties or other sanctions provided for in laws where these penalties or sanctions have been imposed for infringement of the provisions of laws or other legal acts regulating the provision of financial services and pursuit of the activities of financial institutions and where he has been penalised more than once per year; 3) abuses psychotropic, narcotic, toxic substances or alcohol.
175. The supervisory institution shall also have the right to recognise that a person is not of good repute by taking into consideration: 1) his conviction of a crime or a criminal offence, with the exception of the crimes referred to in subparagraph 1 of paragraph 6 of this Article or of corresponding criminal acts under laws of foreign states; 2) the imposition of the sanctions provided for by laws on a legal person whose qualifying holding in the authorised capital and/or voting rights he holds or held or whose head he is or was or the winding up of the said legal person by reason of bankruptcy or by a court’s decision or judgement on other statutory grounds related to inappropriate activities or infringements of legal acts; 3) the suspension, while holding a qualifying holding in a financial institution’s authorised capital and/or voting rights, of his right to exercise the voting right at the general meeting of the financial institution’s members according to the procedure set forth by laws; 4) other important reasons why the person may not be regarded to be of good repute.
176. The supervisory institution shall have the right to refuse to grant a consent to acquire or increase a qualifying holding in a bank’s authorised capital and/or voting rights where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) a person applying for the consent does not meet the requirements set in paragraph 5 of this Article; 3) upon the granting of the consent, the grounds for the refusal to issue a licence referred to in subparagraphs 3 or 4 of paragraph 10 of Article 9 of this Law would arise; 4) the consent cannot be granted taking account of the criteria for the assessment of the systemic risk level laid down by legal acts of the supervisory institution.
177. A decision taken on the granting of a consent shall be notified to a person who has submitted an application and a bank with regard to the acquisition or increase of a qualifying holding in authorised capital and/or voting rights whereof the application has been submitted. The supervisory institution shall have the right to lay down the maximum period of validity of the consent, but not shorter than is necessary to carry out a transaction during which the qualifying holding of the bank’s authorised capital and/or voting rights is to be acquired or increased.
178. A person who has obtained a consent to acquire or increase a qualifying holding in a bank’s authorised capital and/or voting rights must under any circumstances meet the requirements set for the granting of a consent. Article
179. Suspension of the Right to Exercise the Voting Right
180. The supervisory institution shall have the right to take a decision on the suspension of the right of a bank’s shareholder to exercise his voting right at the general meeting of the shareholders where: 1) a consent to acquire or increase a qualifying holding of the bank’s authorised capital and/or voting rights has been obtained by fraud or otherwise violating laws; 2) a person who has obtained a consent to acquire or increase the qualifying holding in the bank’s authorised capital and/or voting rights no longer meets the requirements set by this Law for the granting of a consent.
181. A decision on the suspension of the right of a bank’s shareholder to exercise the voting right at the general meeting of the shareholders may be revoked upon the submission of the documents and data evidencing that the person meets the requirements set by this Law for the granting of a consent to acquire the qualifying holding in the bank’s authorised capital and/or voting rights. The supervisory institution shall decide whether to revoke the decision on the suspension of the right of the bank’s shareholder to exercise the voting right within 30 days of the receipt of the relevant application and the documents confirming that the person meets the requirements set by this Law for the granting of a consent to acquire the qualifying holding in the bank’s authorised capital and/or voting rights.
182. A decision taken on the suspension of the right of this shareholder to exercise his voting right at the general meeting of the shareholders shall be notified to a bank’s shareholder and a bank with regard to the acquisition or increase of the qualifying part in authorised capital and/or voting rights whereof a consent has been granted within 5 working days of the taking of the decision.
183. A decision on the suspension of the right of a bank’s shareholder to exercise his voting right must be substantiated and taken in accordance with the provisions of paragraph 2 of Article 73 of this Law. Article
184. Forced Sale of a Bank’s Shares
185. The supervisory institution shall have the right to apply to the courts requesting the forced sale of a bank’s shares owned by a shareholder of the bank who fails to meet the requirements set by this Law or is exerting an influence which operates to the detriment of the sound management of the bank to a person or persons indicated by the supervisory institution by granting the pre-emption right to other shareholders of the bank.
186. Where in the cases specified by this Law the general meeting of a bank’s shareholders does not take decisions on the restoration of the minimum amount of the capital of the bank or where within the fixed time limit the capital is not restored, the supervisory institution shall have the right to apply to the courts requesting the forced sale of the shares owned by all shareholders of the bank to a person or persons indicated by the supervisory institution and meeting the requirements set by this Law.
187. The forced sale of a bank’s shares shall be carried out according to the procedure set forth in Chapter IX of Part II of Book Two of the Civil Code of the Republic of Lithuania. Work of the experts appointed by the courts and their other expenses shall be borne by the bank. Article
188. Taking over of a Bank’s Shares for Public Needs
189. Where according to the Law on Insurance of Deposits and Liabilities to Investors an insured event, in the event of its occurrence to a bank, may pose a threat to the liquidity of the State undertaking “Deposit and Investment Insurance” (hereinafter in this Article and in Article 29 referred to as “the insurance undertaking”) and proper payment of insurance compensations, the bank’s shares may be taken over from shareholders of the bank for public needs with a fair recompense. The shares taken over shall be managed, used and disposed of by the right of trust by the insurance undertaking.
190. Upon the receipt from the supervisory institution of information that activities of a bank are not safe and sound and that the bank may become insolvent as well as having a sufficient grounds to believe that an insured event, in the event of its occurrence to a bank, may pose a threat to the liquidity of the insurance undertaking and proper payment of insurance compensations, the council of the insurance undertaking shall have the right to take a decision on the taking over of the bank’s shares from the shareholders.
191. A bank’s shareholders shall be given written notice of a decision taken by the insurance undertaking on the taking over of the bank’s shares from the shareholders.
192. Where it transpires that the value of the shares taken over is equal to zero, the right of ownership of the shares taken over shall be transferred from the moment of taking a decision on the taking over of the shares for public needs. In other cases, the right of ownership of the shares taken over shall be transferred from the moment of settlement with the holder of the shares.
193. Disputes relating to the taking over of a bank’s shares shall be settled in court. Filing of an appeal to court shall not have suspensory effect on the decision appealed against.
194. Upon the transfer of the shares taken over into the ownership of the State, the insurance undertaking must, according to the procedure set forth by laws, take all possible and necessary measures to ensure that a bank’s activities are again safe and credible.
195. Where a bank’s activities are again safe and sound, the bank’s shares shall be sold according to the procedure set forth by the legal acts regulating the privatisation of State property. Article
196. Valuation of a Bank’s Shares Taken over for Public Needs and Compensation Therefor
197. A bank’s shares shall be valued by the supervisory institution by taking account of the market value of the bank’s shares and other factors likely to influence value thereof on the basis of the methods (criteria) approved by legal acts of the supervisory institution. However, where the bank fulfils at least one condition set by the supervisory institution for the declaration of the insolvency of a bank, the value of the bank’s shares shall be considered to be equal to zero.
198. Where it transpires that a bank’s shares to be taken over have value, the bank’s shareholders shall be compensated for the shares taken over in money’s worth.
199. Where it transpires that a bank’s shares to be taken over have value, shareholders shall be specified, by a notification referred to in paragraph 3 of Article 28 of this Law, a sum of money to be paid for the shares and informed that they must, within 5 days of the receipt of the notification, give written notice to the insurance undertaking of data on the accounts opened (held) in a credit institution wherein money for the bank’s shares taken over must be deposited. Where the bank’s shareholders avoid accepting the performance of this obligation and fail, within the fixed time limit, to notify of the accounts opened (held) or in other cases specified in paragraph 1 of Article 6.56 of the Civil Code, the insurance undertaking shall settle with the shareholders by depositing the money into the deposit account of a notary, a bank or other credit institution. A deposit of the money into the account indicated by the bank’s shareholders or into the deposit account of a notary, bank or other credit institution shall be considered a proper settlement with the bank’s shareholders.
200. Disputes relating to the valuation of a bank’s shares and the losses incurred upon the taking over of property from its holders shall be settled in court. Filing of an appeal to court shall not have suspensory effect on the decision appealed against. The losses shall be reimbursed according to the procedure set forth by laws. CHAPTER V MANAGEMENT OF A BANK Article
201. Bodies of a Bank
202. A bank must have the following bodies: the general meeting of the shareholders, the supervisory board, the board and the head of the administration.
203. The management bodies of a bank’s shall be the bank’s board and the head of the administration. The bank’s articles of association must clearly establish and define the powers and functions of the bank’s board and the head of administration.
204. The general meeting of shareholders and the supervisory board as well as meetings of the board, in addition to other statutory grounds, may also be convened upon the instruction of the supervisory institution.
205. A bank’s articles of association, the Civil Code, this Law, the Law on Financial Institutions and the Law on Companies shall set forth the procedure for the formation and operation of the bodies of the bank and specify powers, functions and liability thereof, except where this Law provides otherwise. Article
206. Supervisory Board of a Bank
207. The supervisory board of a bank shall: 1) approve operating plans of the bank; 2) lay down the procedure for lending, which may be carried out only upon the approval of the bank’s supervisory board; 3) ensure that the bank has efficient internal control system; 4) consider or decide on the issues which must be considered or decide on by the bank’s supervisory board under this Law and other laws or the bank’s articles of association.
208. Minutes must be taken of all meetings of a bank’s supervisory board. The minutes of a meeting must: 1) specify the venue and time of the meeting, members of the supervisory board attending the meeting, the chairperson of the meeting, information on whether the meeting has a quorum, the agenda of the meeting; 2) present the substance of every issue considered at the meeting, specify the documents and information on the basis whereof every issue is considered, submit a report on speeches of the persons attending the meeting and on proposals made on every issue considered at the meeting, a record of the results of voting and decisions taken and attach the individual opinions and protests of the persons attending the meeting.
209. The documents submitted when considering issues on the agenda of a meeting as well as the documents referred to in paragraph 4 of this Article must be attached to the minutes of the meeting.
210. All members of a bank’s supervisory board, including those who did not attend a meeting of a bank’s supervisory board, must be granted access to the minutes of the meeting of the bank’s supervisory board within 5 days or, where this is impossible, as soon as the circumstances permit. A member of the bank’s supervisory board must confirm in writing that he has been granted access to the minutes of the meeting of the bank’s supervisory board and, where he does not agree with the decisions taken at the meeting, forthwith declare his protest in writing to the supervisory board.
211. Every member of a bank’s supervisory board must take all possible measures to ensure that the supervisory board decides on the issues within the limits of its powers and that the decisions meet the requirements set in legal acts. A member of the bank’s supervisory board shall be held liable for nonfeasance or misfeasance of this duty or other duties set forth by legal acts in the same manner as members of the management bodies of the bank under laws, the bank’s articles of association and agreements concluded with the bank.
212. A member of the bank’s supervisory board may also be a member of the board of the parent undertaking of a bank. Article
213. Board of a Bank
214. The board of a bank shall be a collegial management body of the bank.
215. The board of a bank shall: 1) elect (appoint) and remove from office the head of the administration and his deputy; 2) consider or decide on the issues which must be considered or decided on by the bank’s board under this Law and other laws or the bank’s articles of association.
216. Minutes must be taken of all meetings of a bank’s board. The minutes of a meeting must: 1) the specified venue and time of the meeting, members of the board attending the meeting, the chairperson of the meeting, information on whether the meeting has a quorum, the agenda of the meeting; 2) present the substance of every issue considered at the meeting, specify the documents and information on the basis whereof every issue is considered, submit a report on speeches of the persons attending the meeting and on proposals made on every issue considered at the meeting, a record of the results of voting and decisions taken and attach the individual opinions and protests of the persons attending the meeting.
217. The documents submitted when considering issues on the agenda a meeting as well as the documents referred to in paragraph 5 of this Article must be attached to the minutes of the meeting.
218. All members of a bank’s board, including those who did not attend a meeting of a bank’s board, must be granted access to the minutes of the meeting of the bank’s board within 5 days or, where this is impossible, as soon as the circumstances permit. A member of the bank’s board must confirm in writing that he has been granted access to the minutes of the meeting of the bank’s board and, where he does not agree with the decisions taken at the meeting, forthwith declare his protest in writing to the board.
219. Every member of a bank’s board must take all possible measures to ensure that the board deciders on the issues within the limits of its powers and that the decisions meet the requirements set in legal acts. A member of the bank’s supervisory board shall be held liable for nonfeasance or misfeasance of this duty or other duties set forth by legal acts in the same manner as members of the management bodies of the bank under laws, the bank’s articles of association and agreements concluded with the bank. Article
220. Head of the Administration of a Bank and his Deputy
221. A bank must have the head of the administration and his deputy (hereinafter referred to as “the heads of the administration).
222. The chairperson of the board of a bank must be the head of the administration or his deputy.
223. The heads of the administration of a bank shall be held liable for nonfeasance or misfeasance of the obligations set forth by legal acts or the bank’s articles of association under laws, the bank’s articles of association and the agreements concluded with the bank.
224. Provisions of paragraphs 1 and 3 of this Article shall also be applied to a branch of a foreign bank. Article
225. Heads and Employees of a Bank
226. Heads of a Bank shall be: 1) members of the bank’s supervisory board; 2) members of the bank’s board; 3) heads of the administration; 4) head of the internal audit service; 5) heads of the branches and representative offices of bank as well as other employees of the bank and other persons who, in accordance with the bank’s articles of association, resolutions of the board, the rules of procedure of the administration or by a decision of the heads of the administration, have been authorised to independently take decisions on the provision of financial services and to conclude, on behalf of the bank, the transactions meeting the criteria set by legal acts of the supervisory institution and having risk characteristics.
227. Heads of a bank must be of good repute (paragraphs 6 and 7 of Article 25 of this Law) and have qualifications and experience allowing them to properly exercise their functions. Requirements for the qualifications and experience of the heads of the bank shall be set by legal acts of the supervisory institution. The persons who object that the supervisory institution manages, in the cases and according to the procedure set forth by laws and other legal acts, their data required for the issuance of the licences and granting of the authorisations and consents provided for under this Law, including their personal data and information on a person’s previous convictions and health cannot be heads of the bank.
228. At least one head of a bank’s administration must speak the Lithuanian language and permanently reside in the Republic of Lithuania.
229. Only the persons holding an authorisation of the supervisory institution may be heads of a bank. Legal acts of the supervisory institution may provide for the cases where the requirement for the authorisation of the supervisory institution may be waived.
230. A bank (prior the establishment of the bank – founders thereof) must, at least 30 days prior to the election or appointment of a person head of the bank, notify thereof the supervisory institution and submit the documents and data specified by legal acts of the supervisory institution and evidencing that the person meets the requirements set by the legal acts.
231. Where a bank does not receive a request of the supervisory institution to submit additional information or is not notified of a decision not to grant an authorisation to elect or appoint the head of the bank within 30 days of the receipt of submitted documents and data by the supervisory institution, the authorisation shall be considered to have been granted. Where additional information is requested, the time limit of 30 days shall be counted from the receipt of additional information.
232. The supervisory institution may refuse to grant an authorisation to elect or appoint the head of a bank where: 1) submitted documents do not meet the requirements set in this Law and legal acts of the supervisory institution, not all data specified by the legal acts or additionally required have been submitted or they are incorrect; 2) in the opinion of the supervisory institution, the heads of the bank do not meet the requirements referred to in paragraphs 2 or 3 of this Article; 3) a person whose election or appointment is subject to an authorisation is prohibited from holding this position under other laws.
233. The supervisory institution shall withdraw an authorisation to elect or appoint the head of a bank where: 1) the authorisation has been obtained by fraud or otherwise violating laws; 2) the authorisation has been granted to elect or appoint a person who no longer meets the requirements set by this Law or other laws for the granting of an authorisation.
234. A bank shall be notified of a decision taken on the withdrawal of an authorisation to elect or appoint the head of a bank. Upon taking by the supervisory institution of a decision on the withdrawal of the authorisation and upon the request of the supervisory institution, the bank must, according to the procedure set forth by laws, forthwith remove the head from office and/or terminate the contract concluded therewith.
235. Requirements for the employees of a bank may be set by legal acts of the supervisory institution.
236. Provisions of this Article shall also be applied to a branch and a representative office of a foreign bank. The heads of the branch and the representative office of the foreign bank must meet the requirements set by this Law and legal acts of the supervisory institution for the heads of the administration of the bank. The provisions of paragraphs 4-9 of this Article shall not be applicable to the heads of a branch and a representative office established in the Republic of Lithuania by a foreign bank licensed in a Member State of the European Union. Article
237. Internal Control of Activities of a Bank Requirements for the internal control of the activities of a bank shall be set by the Law on Financial Institutions and legal acts of the supervisory institution. Article
238. Committees of a Bank
239. A bank must have standing credit, internal audit and risk management committees. The bank’s supervisory board shall form the internal audit committee and control activities thereof.
240. A bank shall also have the right to have other committees provided for by the articles of association of the bank.
241. A bank’s articles of association and other documents adopted by the bodies of the bank shall set forth the procedure for the formation and operation of the committees of the bank and specify powers thereof. Requirements for the procedure for the formation and operation of the committees of the bank and powers thereof may also be set by legal acts of the supervisory institution. CHAPTER VI CAPITAL OF A BANK AND APPROPRIATION OF PROFIT Article
242. Capital of a Bank The capital of a bank shall consist of the equity and loan capital. Article
243. Equity Capital
244. The equity capital of a bank shall consist of: 1) authorised capital (reduced by the value of bought-up own shares) excluding the value of non-cumulative preference shares; 2) reserve capital; 3) capital reserves (share premium); 4) retained earnings (loss) of the previous year; 5) tangible fixed assets revaluation reserve; 6) financial assets revaluation reserve; 7) mandatory reserve or reserve capital; 8) restricted (distributable) profit; 9) retained earnings (loss) of the current year; 10) cumulative preference shares; 11) other reserves.
245. A bank may build-up and use the financial assets revaluation reserve where such a reserve has been provided for by its articles of association and accounting policy. Article
246. Loan Capital The loan capital of a bank shall be made up of the funds which the bank has acquired by the right of ownership through borrowing by issuing long-term debt securities (bonds) or concluding loan agreements where the term to maturity of the borrowed funds is at least 2 years and the debt securities (bonds) as well as the received loans have all characteristics of a subordinated loan. Article
247. Minimum Capital of a Bank
248. The sum total, expressed in the euro in accordance with the official rate of the litas and the euro set by the Bank of Lithuania, of the constituent parts of a bank’s equity capital listed in subparagraphs 1, 2, 3 and 4 of paragraph 1 of Article 38 of this Law must be not less than EUR 5 million.
249. The sum total, expressed in the euro in accordance with the official rate of the litas and the euro set by the Bank of Lithuania, of the constituent parts of the equity capital listed in subparagraphs 1, 2, 3 and 4 of paragraph 1 of Article 38 of this Law in respect of a specialised bank which has been authorised only to issue and manage electronic money must be not less than EUR 1 million.
250. Where it transpires that a bank’s capital has fallen below the minimum capital of the bank, the board of the bank must forthwith notify thereof the supervisory institution and immediately convene an extraordinary general meeting of the shareholders. The general meeting of the bank’s shareholders must take decisions which would allow to restore the bank’s capital to the minimum amount of the bank’s capital as quickly as possible. The board of the bank shall notify the supervisory institution of the decisions taken at the general meeting of the shareholders on the restoration of the capital within 3 working days. Article
251. Authorised Capital of a Bank and Shares of the Bank
252. The authorised capital of a bank shall be formed, increased and reduced according to the procedure set forth by the Republic of Lithuania Law on Companies, except where this Law provides otherwise.
253. A bank shall be prohibited from issuing bearer shares and employee shares.
254. Shares of a bank being established may be paid in money’s worth only.
255. When increasing the authorised capital of a bank by additional contributions, new shares of the bank may be paid only in money’s worth or by the rights of claim according to the bank’s payment obligations, except when the bank’s authorised capital is increased in the course of the reorganisation of the bank. A person subscribing for the shares must fully pay-up for the bank’s shares not later than until the day when the bank applies to the supervisory institution for the granting of an authorisation to register amendments to the bank’s articles of association related to the increase of the bank’s authorised capital.
256. A decision of the general meeting of a bank’s shareholders on the increase of the authorised capital, with the exception of a decision on the issuance of convertible debentures, shall be deemed to be void where amended articles of association of the bank have not been submitted to the Register of Legal Persons within 12 months of the general meeting of the shareholders which took a decision on the increase of the authorised capital.
257. Retained earnings, capital reserves (share premium), reserve capital and other reserves may be used to increase the authorised capital of a bank by a decision of the general meeting of the shareholders, except for the reserves referred to in paragraph 7 of this Article, by issuing new shares which are sold free of charge to the shareholders or by increasing the nominal value of the shares issued previously.
258. The mandatory reserve or the reserve capital, the restricted (distributable) profit, the tangible fixed assets revaluation reserve or the financial assets revaluation reserve may not be used to increase the authorised capital of a bank.
259. The funds paid for a bank’s shares shall be accumulated in an account opened for this purpose in a credit institution entitled to provide financial services in the Republic of Lithuania. The bank shall have the right to use the accumulated funds only upon the establishment of the bank or upon the registration of amendments to the articles of association related to the increase of the authorised capital.
260. A bank shall have the right to acquire its shares according to the procedure set forth by the Law on Financial Institutions and the Law on Companies. Article
261. Reduction of the Authorised Capital of a Bank
262. A bank shall have the right to reduce the authorised capital only upon obtaining an authorisation from the supervisory institution.
263. An authorisation to reduce the authorised capital of a bank shall be granted by the supervisory institution according to the procedure set forth by this Law and legal acts of the supervisory institution. An authorisation to reduce the authorised capital shall be granted where the supervisory institution makes sure that the reduced authorised capital of the bank will not fall below the minimum capital of a bank established by this Law and will be sufficient to ensure safe and sound activities of the bank. Article
264. Adjusted Capital of a Bank Adjusted capital of a bank shall be the sum total of the bank’s equity and loan capital reduced by the amount and according to the procedure set forth by legal acts of the supervisory institution. Article
265. Capitals and Reserves of a Bank
266. The reserve capital of a bank shall be formed by the additional contributions of the bank’s shareholders or deductions from the bank’s earnings. The purpose of the bank’s reserve capital shall be to guarantee the financial stability of the bank. The annual general meeting of the shareholders may also take a decision on the use of the reserve capital of the bank to cover losses of activities of the bank in the case referred to in subparagraph 6 of Article 41 of this Law.
267. The capital reserves (share premium) of a bank shall be formed from a difference in the earnings obtained after selling new shares at issue price above their par value or from other cash contributions by the bank’s owners to obtain the right to the bank’s shares.
268. At the close of the financial year, the annual general meeting of a bank’s shareholders may take a decision on the use of the capital reserves (share premium) to cover the losses incurred by the operations related to the sale of own issued shares and on inclusion thereof in the profit available for appropriation or on use thereof to increase the bank’s authorised capital.
269. The tangible fixed assets revaluation reserve shall be the amount of the increase in the value of tangible fixed assets resulting after the revaluation of the assets. The tangible fixed assets revaluation reserve shall be reduced in the event the revaluated assets are written off, depreciated, written down or transferred into the ownership of third parties. A part of the reserve which is left unused after the writing off, depreciating or transferring into the ownership of third parties of the tangible fixed assets may be included in the profit available for appropriation at the close of the financial year. The tangible fixed assets revaluation reserve may not be directly used to cover losses of the activities of a bank.
270. The financial assets revaluation reserve shall be changes in the value of a bank’s available-for-sale financial assets which have been appreciated and revaluated at their fair value.
271. The mandatory reserve or reserve capital shall be formed from a bank’s net profit deductions. Allocations to the mandatory reserve or reserve capital shall be compulsory and may not be less than 1/20 of the profit available for appropriation. The mandatory reserve or the reserve capital may, by a decision of the annual or extraordinary general meeting of the bank’s shareholders, be used only to cover losses of the activities of the bank.
272. Other reserves of a bank shall be the reserves whose formation and use has been provided for in the articles of association of the bank. Article
273. Retained Earnings (Loss) The procedure for using retained earnings (loss) shall be set forth by the Law on Financial Institutions. Article
274. Profit and Appropriation Thereof
275. The profit of a bank and appropriation thereof shall be managed according to the procedure set forth by the Law on Financial Institutions.
276. The profit of a bank which is net of compulsory deductions from profit and transfers to the reserve capital and other reserves and capitals provided for by the bank’s articles of association may not be paid in dividends and bonuses where after taking a decision of the general meeting of the shareholders, the adequacy of capital or the minimum capital of the bank falls below the amounts set by this Law and legal acts of the supervisory institution. CHAPTER VII A BANK’S OPERATIONAL RISK AND PRUDENTIAL TREATMENT THEREOF, PROTECTION OF THE INTERESTS OF THE BANK’S CLIENTS Article
277. Taking of Operational Risk and Prudential Treatment Thereof
278. Requirements for the taking of a bank’s operational risk and prudential treatment thereof shall be set by the Law on Financial Institutions.
279. A bank must make provisions to reduce its operational risk on the basis of legal acts of the supervisory institution and taking account of the risk of every transaction it concludes on the provision of financial services, the financial and economic condition of a client, the performance of the obligations related to the transactions on the provision of financial services, the available means of ensuring the performance of these obligations as well as other circumstances influencing the value of the bank’s assets. Article
280. Prudential Requirements for Banking Activities
281. The following prudential requirements shall be set for banks: 1) capital adequacy; 2) liquidity; 3) maximum open position in foreign currency and precious metals; 4) maximum exposure to a single borrower; 5) large exposures; 6) other requirements set by legal acts of the supervisory institution.
282. The specific ratios and methodology for calculation thereof shall be laid down by legal acts of the supervisory institution. The supervisory institution shall also have the right to set individual ratios for a bank. The supervisory institution shall have the right not to apply to specialised banks some or all requirements referred to in paragraph 1 of this Article and to set, by legal acts, requirements, specific ratios and methodologies for calculation thereof other than those set for commercial banks. Article
283. Limits on Investment
284. A bank may not hold a holding in the authorised capital of a legal person and/or voting rights where the on-balance-sheet value of the holding exceeds 15 per cent of the bank’s adjusted capital.
285. The sum total of the on-balance-sheet values of the holdings in legal persons’ authorised capital and/or voting rights belonging to the bank may not exceed 60 per cent of the bank’s adjusted capital.
286. The provisions of paragraphs 1 and 2 of this Article shall not be applied to investments in the legal persons which are financial institutions, insurance undertakings, reinsurance undertakings or the undertakings pursuing the activities in the absence of which a bank could not provide financial services, which assist the bank in the provision of the financial services or which are otherwise directly related to the financial services provided by the bank.
287. The provisions of paragraphs 1 and 2 of this Article shall not be applied in the cases where holdings in a legal person’s authorised capital and/or voting rights are acquired temporarily (for a time period not exceeding one year) during the winding-up, restructuring or reorganisation of a client or where they have been acquired for distribution purposes, acquired in the bank’s own name, but on behalf of other persons or acquired not for the purpose of exercising the rights granted by them.
288. The provisions of paragraphs 1 and 2 of this Article shall not be applied where the amount by which a bank exceeds the above-mentioned limits is net of the bank’s adjusted capital. Where the bank exceeds both limits referred to in paragraphs 1 and 2 of this Article, a larger part exceeding the limits shall be deducted from the bank’s adjusted capital.
289. A specialised bank which has been authorised only to issue and manage electronic money may not hold any holding in the authorised capital and/or voting rights of a third legal person, except where the third legal person exercises operational or other supporting functions related to the electronic money issued and managed by this specialised bank. Article
290. Limits on Investment in Land and Other Immovable Property
291. A bank’s investments in land and other immovable property may not exceed 5 per cent of the bank’s adjusted capital.
292. Paragraph 1 of this Article shall not be applied where: 1) land and other immovable property has been acquired to ensure direct activities of a bank (buildings wherein the registered office of the bank is located or wherein financial services are provided, etc.); 2) immovable property has been acquired to provide the service of financial lease (leasing); 3) land and other immovable property has been acquired to cut the losses incurred by a financial service provided to a client, where the bank holds such a property by the right of ownership for a time period not exceeding one year from the day of its acquisition. Article
293. Lending
294. In Articles 52-54 of this Law, lending shall be considered to be the conclusion of transactions wherefrom a monetary claim of a bank or irrevocable monetary commitment of the bank arises.
295. The following limits on lending shall be applied to a bank: 1) internal lending; 2) lending to the persons related to the bank; 3) lending to acquire holdings in the authorised capital and/or voting rights of a legal person. Article
296. Limits on Internal Lending
297. Lending to the heads of a bank and to the persons related to the heads of the bank by blood as well as by marriage may not exceed the amounts set by the bank’s supervisory board. The terms of and the procedure for lending must be approved by the bank’s supervisory board. Decisions on the lending must be taken by the bank’s board. The person related to the lending may not participate in the taking of such a decision.
298. The terms of lending set for the persons referred to in paragraph 1 of this Article may not be more favourable than the terms of lending set for other clients of a bank. Article
299. Limits on Lending to the Persons Related to a Bank
300. The persons related to a bank shall be: 1) the persons holding a qualifying holding in the bank’s authorised capital and/or voting rights; 2) the legal persons whose qualifying holding in the authorised capital and/or voting rights is held by the bank; 3) the heads of the legal persons referred to in subparagraphs 1 and 2 of paragraph 1 of this Article and the persons related thereto by blood as well as by marriage; 4) the natural persons related by blood as well as by marriage to the natural persons referred to in subparagraph 1 of this Article; 5) the undertakings controlled by the persons referred in subparagraph 1 of paragraph 1 of this Article.
301. A bank may lend not more than 20 per cent of the adjusted capital of the bank to the persons related thereto.
302. Where the supervisory institution exercises, according to a set procedure, consolidated supervision of the whole financial group, the supervisory institution shall have the right to set other requirements for lending to the persons related to the bank who are a parent undertaking or an undertaking controlled by the bank and/or are one or more undertakings controlled by that parent undertaking.
303. The terms of and the procedure for lending to the persons related to a bank must be approved by the bank’s supervisory board. A decision to lend to a person related to the bank must be taken by the board of the bank by at least 2/3 of votes of the members of the bank’s board attending the board’s meeting. Article
304. Limits on Lending to Acquire Holdings in the Authorised Capital and/or Voting Rights of a Legal Person A bank shall not have the right to lend for the purposes of the acquisition of holdings in its authorised capital and/or voting rights, granting of a subordinated loan to itself or the acquisition of the debt securities (bonds) issued by the bank and having all characteristics of a subordinated loan. Article
305. Secret of a Bank
306. The secret of a bank shall be all data and information known to the bank on: 1) accounts held in the bank by the bank’s client, the balance of funds in these accounts, the client’s operations performed with the funds in his account, the terms of the contracts on the opening of the accounts by the client; 2) liabilities of the bank’s client to the bank and terms of the contracts wherefrom these liabilities have arisen; 3) other financial services provided to the bank’s client and terms of the contracts on the provision of the financial services; 4) the financial situation and assets of the bank’s client, activities, operating plan, liabilities to third parties or transactions concluded with the third parties, commercial (industrial) or professional secrecy of the client.
307. A bank, the bank’s employees and any third parties being in the possession of the information which is considered a secret of the bank’s may not divulge such information for an indefinite period of time, except in the cases referred to in paragraphs 3-5 of this Article.
308. The information which is considered a secret of a bank may be divulged only to the bank’s client whereto the information which is considered a secret of the bank is related or upon his written request specifying to whom and what information must be divulged.
309. A bank shall have the right to divulge the information which is considered a secret of the bank to courts or third parties where this is necessary to protect the legitimate interests of the bank and only to the extent this is necessary to protect the bank’s interests.
310. A bank shall provide the information which is considered a secret of the bank to the institutions referred to in the Law on the Prevention of Money Laundering, also to third parties according to the procedure set forth by laws where, according to the laws, the bank must provide such information thereto. Article
311. Protection of the Interests of Clients
312. At the places where a bank provides financial services to clients, the bank’s name and the financial services which the bank has the right to provide must be indicated, in an easily accessible place, to every prospective client; conditions must also be provided for public access to the information referred to in paragraph 2 of this Article.
313. Prior to concluding a contract on the provision of financial services, a bank must provide a client with detailed information on the terms of the provision of the financial services, price of the services, duration of the provision of the services, possible consequences thereof and other information which may influence the client’s decision to enter into the contract.
314. A bank must provide to each current or prospective client, upon his request, its annual accounts and an auditor’s report, which, under legal acts, the bank must provide to the public. CHAPTER VIII SUPERVISION OF FINANCIAL GROUPS ON A CONSOLIDATED BASIS Article
315. Scope of Supervision on a Consolidated Basis Supervision on a consolidated basis shall be exercised in respect of: 1) a financial group which consists of a parent bank and the financial institutions and insurance undertakings controlled by it (hereinafter referred to in this Chapter as “controlled institutions”); 2) a financial group where at least one of the controlled undertakings of the financial group is a bank, and the parent undertaking of this financial group is a financial holding company; 3) a bank not belonging to a financial group where 20 per cent or more of the bank’s authorised capital and/or voting rights are directly and/or indirectly held by a financial institution or an insurance undertaking belonging to the financial group subject to supervision on a consolidated basis and where, in the opinion of the supervisory institution exercising supervision on a consolidated basis, it is relevant for the exercise of supervision of the financial group on a consolidated basis; 4) a financial institution not belonging to a financial group where it is controlled by a member of the parent bank of the controlled institutions of the financial group or of one of the banks of the financial group where the financial group is subject to supervision on a consolidated basis. Article
316. Drawing up of Consolidated Accounts for Supervision Purposes
317. The parent bank of other controlled institutions belonging to a financial group must draw up consolidated accounts.
318. The persons belonging to the financial groups referred to in subparagraphs 1 and 2 of Article 57 of this Law and the persons referred to in subparagraphs 3 and 4 of Article 57 must submit to the parent bank of other controlled institutions belonging to the financial group reports, data and information required for the drawing up of consolidated accounts and the exercise of supervision on a consolidated basis.
319. The parent bank of other controlled institutions belonging to a financial group must prepare and submit to the supervisory institution the consolidated financial reports and reports meant for supervision of the whole financial group. The said reports must be submitted quarterly at the time set by the supervisory institution.
320. The parent bank of other controlled institutions belonging to a financial group must prepare and submit to the supervisory institution annual consolidated accounts and the report of an independent auditor within 4 months of the close of the financial year. Article
321. Supervision on a Consolidated Basis
322. The supervisory institution specified in Article 64 of this Law shall exercise supervision of the whole financial group on a consolidated basis, except in the cases referred to in paragraphs 2 and 3 of this Article.
323. Where at least one of the persons specified in paragraph 2 of Article 58 of this Law falls under the jurisdiction of a Member State of the European Union, the institution exercising supervision on a consolidated basis shall be determined by the agreements concluded with the supervisory institutions of other Member States of the European Union or legal acts of the supervisory institution.
324. Where at least one of the persons specified in paragraph 2 of Article 58 of this Law falls under the jurisdiction of a state other than a Member State of the European Union, the supervisory institution specified in Article 64 of this Law shall supervise on a consolidated basis only the banks holding a licence issued by it as well as the financial institutions and insurance undertakings directly and/or indirectly controlled by them and the financial institutions and insurance undertakings 20 per cent or more of the authorised capital and/or voting rights whereof are directly and/or indirectly held by the above-mentioned bank.
325. The supervisory institution exercising supervision of the whole financial group on a consolidated basis may, for the purposes of consolidated supervision, request that the persons specified in paragraph 2 of Article 58 of this Law as well as a mixed-activity holding company and the undertakings controlled by the company submit, and they must submit, the reports, data or information necessary for the supervisory institution. The financial reports submitted upon the request of the supervisory institution must be approved by an auditor.
326. Prudential requirements set for a bank by Article 48 of this Law shall, on a consolidated basis, be applied to the whole financial group.
327. The members of a financial group which is subject to supervision on a consolidated basis must ensure an adequate internal control system intended to prepare all data and information which may be relevant for the exercise of supervision on a consolidated basis.
328. Where the parent undertaking of a bank is a mixed-activity holding company, the supervisory institution shall have the right to exercise the supervision of the transactions concluded between the bank and the mixed-activity holding company as well as between the bank and other undertakings whose parent undertaking is the company by assessing their risk management and the internal control system. CHAPTER IX ACCOUNTING, ACCOUNTS AND AUDIT OF A BANK Article
329. Accounting
330. A bank must keep accounts in compliance with laws of the Republic of Lithuania and other legal acts as well as the accounting policy selected by the bank, which is implemented by taking account of specific circumstances, the nature of the business pursued and in conformity with the international accounting standards.
331. Accounting policy must cover general accounting principles, accounting methods and regulations designed to keep the accounts of a bank and to draw up and submit accounts. Where supervision on a consolidated basis is exercised of a financial group, the bank must ensure that the common accounting policy of the financial group is formulated.
332. Th