EN ECB-P UBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 30 May 2011 
on financial market supervisory reform in Lithuania  
(CON/2011/46) 
 Introduction and legal basis
 
On 20 April 2011, the European Central Bank (ECB) received a request from the Lithuanian Ministry of 
Finance for an opinion on a draft law on reform of fi nancial market supervision (hereinafter the ‘draft 
reform law’) and on draft amendments to the Law on  Lietuvos bankas (hereinafter the ‘draft amending 
law’) (jointly the ‘draft laws’).  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union, and the third, fifth and sixth indents of Article 2(1) of Council 
Decision 98/415/EC of 29 June 1998 on the consulta tion of the European Central Bank by national 
authorities regarding draft legislative provisions1, as the draft laws relate to  Lietuvos bankas, payment and 
settlement systems, and rules applicable to financial institutions insofar as they materially influence the 
stability of financial institutions and markets. In a ddition, the ESCB contributes to the smooth conduct of 
policies relating to the prudential supervision of credit institutions and the stability of the financial system 
under Article 127(5) of the Treaty. In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, th e Governing Council has adopted this opinion. 
 1.  Purpose of the draft laws 
1.1 The main purpose of the draft laws is to establish a legal framework for integrated supervision of 
the Lithuanian financial market by the sole au thority Lietuvos bankas. Currently, Lietuvos bankas 
is one of three financial market supervisors in  Lithuania and supervises credit institutions. The 
other financial market supervisors are the S ecurities Commission, responsible for prudential 
supervision and the conduct of business in capit al markets, and the Insurance Supervision 
Commission, responsible for prudential supervis ion and the conduct of business in insurance 
markets (hereinafter referred to coll ectively as the ‘other supervisors’). 
1.2 On 31 December 2011, the other supervisors will be dissolved and their functions will be 
transferred to Lietuvos bankas. Hence, Lietuvos bankas’ responsibilities will be extended to the 
supervision of capital and insurance markets. The draft amending law c onfers on Lietuvos bankas 
the task of contributing to the maintenance of th e stability and credibility of the financial system. 
The Government will assume the liabilities of the other supervisors. 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
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2 1.3 According to the draft laws, contributions by fina ncial market participants  and by Lietuvos bankas’ 
other funds will finance supervision of the entire financial market. Currently, market participants 
and the State budget finance supervision of the capital and insurance markets.  
1.4 In addition, according to the draft amending law, Lietuvos bankas will be en trusted with consumer 
protection. A new non-judicial dispute settlement  mechanism for disputes between consumers of 
financial services and financial market participants  will be introduced on 1 January 2012, in which 
Lietuvos bankas will play a major role. Currently , the Insurance Supervision Commission resolves 
consumer disputes in the insurance market, while  the State Consumer Rights Protection Authority 
settles consumer disputes in capital and credit institutions’ markets. 
1.5 In addition to the financial mark et supervisory reform, the draft amending law also transposes some 
Union legislation.  
1.5.1 In accordance with Council Regulation (E C) No 45/2009 of 18 December 2008 amending 
Regulation (EC) No 1339/2001 extending the eff ects of Regulation (EC) No 1338/2001 laying 
down measures necessary for the protection of th e euro against counterfeiting to those Member 
States which have not adopted the euro as their single currency2, Lietuvos bankas is to be entrusted 
with ensuring that credit and payment institutions  and other professional cash handlers check cash 
for authenticity and ensure that counterfeits are detected. 
1.5.2 In transposing Directive 2009/110/EC of the European Parliament and of the Council of 
16 September 2009 on the taking up, pursuit and prudential supervision of the business of 
electronic money institutions amending Direc tives 2005/60/EC and 2006/48/EC and repealing 
Directive 2000/46/EC3, Lietuvos bankas is to be entruste d with supervising electronic money 
institutions. 
 2.  General observations 
2.1 The ECB understands that Lietuvos bankas, th e Ministry of Finance and other supervisors
4 were 
involved in the drafting of the draft laws and that  the Lithuanian Government also supports reform 
of financial market supervision5. The ECB welcomes the proposal to integrate financial market 
supervision within Lietuvos bankas. In a Member  State with a relatively small financial market, 
such as Lithuania, there are strong arguments fo r concentrating supervisory responsibilities in a 
single authority6.  
2.2 The ECB considers that the proposed extensi on of Lietuvos bankas’ supervisory tasks to non-
banking supervision is compatible  with its European System of Central Banks (ESCB) tasks. In 
particular, the ECB welcomes the transfer of pr udential supervision of all financial market 
                                                 
2  OJ L 17, 22.1.2009, p. 4. 
3  OJ L 267, 10.10.2009, p. 7.  
4  See the explanatory memo randum to the draft laws. 
5  Resolution of the Government No 580 of 19 May 2010 appr oving the joining of authorities supervising the financial 
market, Valstybės žinios, 27.5.2010, No 61-2991.  
6  See also Opinion CON/2005/39, paragraph 4. All ECB opin ions are published on the E CB’s website www.ecb.europa.eu. 
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3 intermediaries to Lietuvos bankas. Faced with the increasing blurring of tr aditional borders between 
the banking, securities and insurance sectors a nd the resulting new challenges to prudential 
supervision and the stability of the financial sy stem, a national central bank (NCB) with overall 
responsibility for the financial markets is likely to cope better than several supervisors whose 
supervisory competences are limited to a particular financial sector7. 
2.3 It is important that the financial market superv isory reform is implemented in a manner which fully 
takes into account the internationally agreed principles of operational independence and sound 
governance of supervision8. 
 3.  Specific observations 3.1  Lietuvos bankas’ contribution to the mainte nance of the stability and credibility of the financial 
system  
3.1.1  The draft amending law provides that Lietuvos  bankas will contribute to the maintenance of the 
stability and credibility of the entire financial sy stem. However, this aim is confined to the 
supervision of the financial market
9. The ECB would welcome the express recognition in the draft 
amending law, as in the statutes of other Member States’ NCBs, that Lietuvos bankas has the wider 
task of contributing to the stability of the financial system as a whole10, for example, by inserting 
this task in the particular articles of the Law on Lietuvos bankas that list Lietuvos bankas’ functions
11, without prejudice to any oversight competen ce exercised in relation to financial market 
infrastructures by Lietuvos bankas.  
3.1.2 While the entire legislative package of financial market supervisory reform  consists of 38 legal 
acts, the ECB was consulted on two draft legal act s only. The ECB understands that the exact scope 
of Lietuvos bankas’ supervision is to be defined in amendments to the Lithuanian sectoral financial 
market legal acts, on which the ECB have not been consulted. In setting the exact scope of Lietuvos 
bankas’ regulatory powers, the ECB invites the consulting authority to take into account this 
Opinion and ECB convergence reports12, especially as regards central bank independence. 
3.1.3 The draft reform law provides that the Government will adopt acts implementing the draft reform 
law13. The ECB notes that any such implementing act s should be adopted in consultation with 
Lietuvos bankas and may not interfere with Liet uvos bankas’ own regulatory and oversight powers 
defined in the draft amending law. 
                                                 
7  See also Opinion CON/2005/39, paragraph 5. 
8  See also Opinion CON/2011/37, paragraph 3.1. 
9  Draft amending law (proposed draft Article 42(1) of th e Law on Lietuvos bankas (‘Aim,  Functions and Rights of 
Lietuvos bankas in the performance of th e financial market supervision’)). 
10  See also Opinion CON/2005/39, paragraph 6. 
11  For example, Article 7 (‘main task of  Lietuvos bankas’) or Article 8 (‘Lietuvos bankas’s functions and activities’) of the 
Law on Lietuvos bankas. 
12  For example, pp. 15 to 29 of Convergence Report, May 2010, available on the ECB’s website at www.ecb.europa.eu. 
13  Article 7(1) of the draft reform law. 
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4 3.2 Central bank independence and th e monetary financing prohibition 
3.2.1 Generally, as regards the financing of the task s transferred to Lietuvos bankas, the ECB refers to 
the principle of financial independence under which an NCB must have sufficient means to perform 
its ESCB-related tasks and national tasks14. The tasks transferred to Lietuvos bankas should not 
affect its ability to carry out its ESCB-related task s from an operational and financial point of view.  
3.2.2 In particular, the ECB notes that the draft amending law provides that the supervisory tasks 
transferred to Lietuvos bankas will be financed by  contributions from the supervised institutions 
and by Lietuvos bankas’ other funds15. The principle of financial independence requires adequate 
financing of the tasks transferred to Lietuvos ba nkas by contributions from supervised institutions 
and that their exercise will not result in any loss for Lietuvos bankas16. The ECB understands that 
the concrete terms for financing Lietuvos bankas’  supervisory tasks from 1 January 2012 will be 
laid down by Lietuvos bankas separately17 and will comply with the principle of Lietuvos bankas’ 
financial independence. In partic ular, it is important to ensure that Lietuvos bankas defines these 
contributions independently. 
3.2.3 Since the provisions under which an NCB becom es the legal successor to any liabilities of a distinct 
supervisory authority may raise issues of fi nancial independence and compliance with the 
prohibition of monetary financing laid  down in Article 123(1) of the Treaty18, read in conjunction 
with Regulation (EC) No 3603/93, the ECB we lcomes the provision in the draft reform law19, 
according to which the Government will assume the liabilities of the other supervisors after their 
dissolution. Such liabilities would include, for example, the payment of any compensation20 
resulting from any pending or future  legal proceedings challenging the actions of these supervisors 
after the transfer of tasks to Lietuvos bankas.  
3.2.4 The ECB welcomes the provision on transfer of the ‘assets’ of the other supervisors to Lietuvos 
bankas21. However, legal certainty wo uld be enhanced if the draft reform law would expressly 
provide the exact scope of these assets, since none of  the draft laws provides for the destiny of the 
financial and human resources of these supervisors. 
3.2.5 In this context, the ECB is particularly c oncerned about the transitional period since without any 
provision for the financial and human resources of the other supervisors, it may not be feasible for 
Lietuvos bankas to ensure the continuity of effici ent supervision of the entire financial market from 
1 January 2012. Continuity of supervision is necessary to ensure  financial stability and it is 
essential that there is no lack of supervision for any time due to the reorganisation of the supervision structure. The ECB understands th at a Commission of representatives from Lietuvos 
                                                 
14  See the ECB’s Convergence Report, May 2010, p. 21, and notably Opinion CON/2009/93, paragraph 3.1.5.  
15  Draft amending law (proposed draft Articl e 44(1) of the Law on Lietuvos bankas). 
16  See for example Opinion CON/2011/5, paragraph 3.3. 
17  Draft amending law (proposed draft Arti cle 44(2) of the Law on Lietuvos bankas). 
18  Opinion CON/2010/33, paragraph 3.2.3. 
19  Article 6(4) of the draft reform law. 
20  Article 6(3) of the draft reform law. 
21  Article 5(2) of the draft reform law. 
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5 bankas, other supervisors and the Ministry of Fi nance will be established ‘to ensure the proper 
supervision of the financial market following 31 December 2011’22. However, the main issues 
arising as a consequence of the transfer of ne w tasks to Lietuvos bankas, such as its governance 
structure and the human and financial resources necessary to carry out these tasks, should be 
addressed in the draft laws. In general, Liet uvos bankas should dispose of sufficient human 
resources, both in terms of quantity and qualit y, to perform all its tasks efficiently. 
3.3  Cooperation with other authorities  
3.3.1 The draft amending law also provides that Li etuvos bankas may conclude agreements with the 
financial market supervisors of other c ountries to cooperate in financial markets23. The ECB 
recommends broadening the wording of this pr ovision so that Lietuvos bankas may conclude 
agreements with all relevant foreign authorities,  including other central banks and national and 
European supervisory authorities, such as the Euro pean Banking Authority. Such cooperation needs 
to be accompanied by appropriate protection measures to safeguard confidentiality.  
3.3.2 The ECB recommends expanding the scope of this  provision to ensure that the draft amending law 
allows for confidential data to be communicated to  the ECB, not only in its capacity as a monetary 
authority, but also for the performance of the ESCB tasks in accordance with Article 127 of the 
Treaty. Access to prudential information and cooper ation with financial s upervisory authorities is 
essential for macro-prudential monitoring which, in turn, is indispensable for the smooth conduct of 
monetary policy and helpful in reducing the reporting burden imposed on institutions24.  
 The recent financial crisis has shown that, from a financial stability perspective, the ECB needs to 
be involved in the event of any financial market crisis and in that context, the availability of 
relevant information and the ab ility to interpret it are crucial25. 
3.4 Lietuvos bankas' consumer protection role 
3.4.1 Consumer protection26 is not included in the NCB tasks speci fied in the Statute of the European 
System of Central Banks and of the European Cent ral Bank (hereinafter the ‘Statute of the ESCB’). 
However, as pointed out on previous occasions27, the ECB does not consider that this task would 
interfere with the ESCB’s objectives and tasks. 
3.4.2  Pursuant to the last sentence of Article 14.4 of the Statute of the ESCB, this task would have to be 
performed under the responsibility and liability of  Lietuvos bankas, and would not be regarded as 
being part of the ESCB’s functions.  
3.4.3 The ECB understands that this task has been  allocated to Lietuvos bankas due to its overall 
responsibility for supervision of the entire financial market. In this context, the ECB considers that 
                                                 
22  Article 8(2) of the draft reform law. 
23  Draft amending law (proposed draft Arti cle 46 of the Law on Lietuvos bankas) . 
24  See Opinion CON/2011/5, paragraph 3.10. 
25  See Opinion CON/2011/5, paragraph 3.10. 
26  Draft amending law (proposed draft Arti cle 45 of the Law on Lietuvos bankas). 
27  See for example Opinions CON/2006/47, CON/2006/38, CON/2007/8 and CON/2007/29.  
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6 it may complement Lietuvos bankas’ supervisory powers and thus contribute to the soundness of 
the financial market and preservation of confidence in the market. 
3.4.4 The ECB notes the allocation of new powers to  Lietuvos bankas with the aim of ensuring the 
transparency of transactions for financial service s and products offered by entities subject to its 
supervision; this could improve the clarity and efficiency of the national regulatory framework 
while ensuring adequate consumer protection and a level playing field. Prudential supervision and 
investor/consumer protection are intended to safe guard the soundness of the financial market and 
preserve confidence in the marketplace. 
3.4.5 However, as previously stated by the ECB in rela tion to other NCBs, it is important to ensure that 
prudential supervision and investor/consumer protect ion have adequate and equal emphasis and that 
appropriate resources are available to ensure their performance28. 
3.4.6 The ECB therefore expects that, when gran ting these additional powers to Lietuvos bankas, care 
will be taken to ensure that Lietuvos bankas’ ope rational capacity to carry out ESCB-related tasks 
will not be affected.   
3.5 Protection of cash against counterfeiting and supervision of electronic money institutions 
3.5.1 Under the draft amending law, Lietuvos bank as will be entrusted with the supervision of the 
protection of cash against counterfeiting and th e supervision of electronic money institutions. 
Subject to the observations below, the ECB welcomes this widening of powers provided it is supported by sufficient human and financial resour ces, both in terms of quantity and quality, to 
avoid affecting Lietuvos bankas’ capacity to carry out ESCB-related tasks
29.  
3.5.2 As regards the new Lietuvos bankas’ task in supervising the protection of cash, the ECB notes that 
Article 1 of Regulation (EC) No 45/2009 extended th e application of Articles 1 to 11 of Regulation 
(EC) No 1338/200130 to those Member States that have not adopted the euro as their single 
currency. The ECB understands that Lietuvos bank as will be responsible for ensuring that the 
entities engaged in the processing and distribution to the public of euro notes and coins are 
discharging their obligations under Article 6(1) of Regulation (EC) No 1338/2001.  
3.5.3 In this context, the ECB notes that the list of  entities subject to Article 6(1) of Regulation (EC) 
No 1338/2001 encompasses more th an ‘credit and payment institutions and other professional cash 
handlers’31. The ECB recommends aligning the national la w with Article 6(1) of Regulation (EC) 
No 1338/2001. 
3.5.4 Since Regulation (EC) No 1338/2001 is intended to protect the euro and not cash in general, the 
ECB recommends a corresponding clarification in  the draft amending law in this regard. 
                                                 
28  See Opinions CON/2006/47, C ON/2006/38, CON/2007/8 and CON/2007/29. 
29  See also Opinions CON/2009/27 and CON/2009/40. 
30  Council Regulation (EC) No 1338/2001 of 28 June 2001 laying down measures necessary for the protection of the euro 
against counterfeiting (OJ L 181, 4.7.2001, p. 6). 
31  Draft amending law (proposed draft Article 6(3) of the Law on Lietuvos bankas). 
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7 3.5.5 Finally, the ECB notes that the new compet ence conferred upon Lietuvos bankas regarding the 
protection of the euro against counterfeiting converg es to some extent, as regards euro banknotes, 
with the Eurosystem legal framework on the veri fication of the authenticity of euro banknotes32. 
The ECB is confident that this will facilitate the convergence of the national legislative framework 
necessary for Lithuania’s preparations for full pa rticipation in economic and monetary union. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 30 May 2011. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
32  Decision ECB/2010/14 of 16 September 2010 on the authentic ity and fitness checking and recirculation of euro 
banknotes (OJ L 267, 9.10.2010, p. 1).