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OPINION OF THE EUROPEAN CENTRAL BANK 
of 7 December 2011  
on the revised amendments to Lietuvos bankas’ profit distribution rules 
(CON/2011/99) 
 
Introduction and legal basis  
On 30 November 2011, the European Central Bank (E CB) received a request from Lietuvos bankas for an 
opinion on a revised draft law amending and supple menting Article 23 of the Law on Lietuvos bankas as 
regards the rules on the distribution of Lietuvos banka s’ profit (hereinafter the ‘revised draft law’). 
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 indent  of Article 2(1) of Council Decision 98/415/EC of 
29 June 1998 on the consultation of the European Ce ntral Bank by national authorities regarding draft 
legislative provisions1, as the draft law relates to Lietuvos bankas.  In accordance with the first sentence of 
Article 17.5 of the Rules of Procedure of the Eur opean Central Bank, the Governing Council has adopted 
this opinion. 
 1.  Purpose of the revised draft law 
1.1 Pursuant to Article 23(3) of the Law on Lietuvos ba nkas, the profit for a financial year is allocated 
in the following order:  
(a) first, to cover losses carried forw ard from previous financial years;  
(b) second, 70 % is distributed to the State bu dget, after deducting losses carried forward from 
the previous financial years; 
(c) third, any remaining profit is allocated equa lly between authorised and reserve capital, until 
the authorised capital reaches LTL 200 million;  
(d) fourth, any residual profit is allocated to reserve capital. 
1.2 The revised draft law establishes a new framework for the distribution of Lietuvos bankas’ profits. 
1.2.1 It provides for improved arrangements relating to the sequence in which the net distributable profit 
will be allocated. First, the net distributable pr ofit will cover uncovered losses and will be allocated 
to authorised capital up to a determined amount. S econd, it will be used to maintain an adequate 
reserve capital level; the Board of Lietuvos bankas will establish the adequate reserve capital level 
independently, based on its assessment of poten tial risks faced by Lietuvos bankas. The reserve 
capital may not be less than five times the amount of the authorised capital. Third, any excess will 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
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2 be contributed to the State budget; this contri bution may not exceed the amount corresponding to 
70 % of the calculated average of Lietuvos bankas’ profit (loss) of the last three financial years.  
1.2.2 Furthermore, the revised draft law provides fo r the possibility to carry forward the part of the 
profit, which remains after the allocation of the net distributable profit according to the established 
sequence, and by doing so to create retained ear nings. The net distributable profit for a given 
financial year therefore consists in the profit for the financial year and any undistributed profit 
carried over from the previous financial years. Simi larly, the revised draft law provides that the loss 
for a given financial year and any undistributed profit carried over from the previous financial 
years will be attributed to the net distributable lo ss and that, furthermore, the net distributable loss 
will be covered by Lietuvos bankas’ reserve cap ital, and where this is insufficient, by the 
distributable profit of the succeeding financial years.  
1.3 The revised draft law also sets out the conditions  under which the part of Lietuvos bankas’ profit 
contribution to the State budget for the financial y ear 2011, which is to be calculated according to 
the rules currently in force, ma y be used to compensate Lietuvos  bankas at market value for the 
transfer of some assets of Lietuvos  bankas to the State authorities. 
 2. General observations  2.1 On 10 November 2011, the ECB adopted Opinion CON/2011/91 on the amendments to Lietuvos 
bankas’ profit distribution rules
2 in response to a request for an opinion on a previous version of the 
revised draft law (hereinafter the ‘draft law’).  The draft law amended the reference period for 
calculating Lietuvos bankas’ profit to be distributed to the State budget: instead of basing the calculation on the preceding financial year, as prov ided for in the Law on Lietuvos bankas, it was 
to be based on the average profit of the precedi ng three financial years. Where the calculated 
amount, based on the average profit of the preceding th ree years, was to be greater than the profit 
of the preceding financial year, the remaining part of Lietuvos bankas’ distribution was to be paid 
to the State budget from Lietuvos bankas’ reserve cap ital. In addition, the following were to be 
deducted before distribution to the State budget: (a ) 30 % of the market value of Lietuvos bankas’ 
real property transferred to the State Property Fu nd during the preceding financial year; and (b) if 
Lietuvos bankas’ reserve capital was lower than five  times the authorised capital, an amount equal 
to this difference. 
2.2 In Opinion CON/2011/91 the ECB noted that sev eral aspects of the draft law raised concerns 
regarding its compatibility with central bank fi nancial independence and with the monetary 
financing prohibition. The ECB notes that  its remarks were taken into account. 
2.3 In any event, the proposed revised profit distri bution scheme needs to comply with the requirement 
that any transfer of national central bank (NCB) reso urces to a Member State, either in the form of 
a profit distribution scheme or any equivalent form , complies with the limitations imposed in this 
respect by the Treaty, in particular with the principle of central bank independence pursuant to 
                                                 
2  All ECB opinions are available on th e ECB’s website at www.ecb.europa.eu. 
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3 Article 130 of the Treaty, and with the prohibi tion on monetary financing laid down in 
Article 123(1). 
 3. Specific observations 
3.1 Treatment of losses 
The revised draft law addresses the ECB concerns as regards the treatment of losses
3 and stipulates 
that any uncovered loss carried forward from previ ous financial years has to be covered before 
allocating the net distributable profit4. 
3.2  Creation of financial provisions 
The ECB welcomes the provision of the revised draft law stipulating that the Board of Lietuvos 
bankas can take an independent decision to allo cate necessary amounts to the reserve capital, 
taking into account the potential impact of risks faced by Lietuvos bankas5; this addresses the 
ECB’s comment that NCBs must be free to indepe ndently create financial provisions or buffers to 
safeguard the real value of their capital and assets6. In this context, the ECB reiterates7 that NCBs 
need to maintain adequate net e quity to be covered against potentia l risks arising from the nature of 
their activities . 
3.3 Three-years average rule 
3.3.1 The revised draft law changes the concept of th e three-years average rule, which is now considered 
as a calculation method and a cap for the Lietuvos bankas’ profit distribution to the State budget8; 
Lietuvos bankas’ net distributable profit includes the last financial year profit plus undistributed profit carried over from the previous financial year s. These changes introduced in the revised draft 
law address the ECB’s concerns as regards th e compliance with the monetary financing 
prohibition
9. 
3.3.2 The ECB welcomes in particular that the re vised draft law leaves una ffected Lietuvos bankas’ 
reserve capital and ensures that the actual c ontribution to the State budget cannot exceed the 
amount of the net distributable profit. The ECB unde rstands that should the net distributable profit 
be insufficient to fully cover the calculated prof it contribution according to the revised draft law, 
i.e. the amount corresponding to 70 % of the calculate d average of Lietuvos bankas’ profit (loss) of 
the last three financial years, the part of the cal culated profit contribution which cannot be paid to 
the State in the given financial year cannot result in  a claim of the State for the allocation of profit 
in the future. 
                                                 
3  Paragraph 3.6 of Opinion CON/2011/91. 
4  Proposed Article 23(1) and (2) and Article 23(3)(1) of the revised draft law. 
5  Proposed Article 23(3)(3) of the revised draft law. 
6  ECB’s Convergence Report May 2010, p. 23. Paragraph 3.7.1 of Opinion CON/2011/91. 
7  Paragraph 3.7.3 of Opinion CON/2011/91. 
8  Proposed Article 23(3)(4) of the revised draft law. 
9  Paragraph 4.2 of Opinion CON/2011/91. 
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4 3.4 Transfer of Lietuvos bankas’ real property 
3.4.1 The revised draft law amends the compensation ru le for the remuneration of transferred property. It 
addresses the ECB concern that in order to be comp atible with the monetary  financing prohibition, 
the transfer to the State of NCB assets, e.g. real property, must be remunerated at the market value 
of the real property transferred to it and the transfer  of the real property to the State should occur at 
the same time as the remuneration10. The ECB understands that if the compensation rule could not 
be applied due to an insufficient profit contribution by Lietuvos bankas to the State, as provided for in the revised draft law, the transfer of Lietuvos bankas’ real property would either not take place or 
an alternative appropriate means of remunerati on would have to be agreed with the State 
authorities. 
3.4.2 The ECB’s comment on the unclear legal status  of Lietuvos bankas’ assets and its consequences 
remains valid
11, since the revised draft law treats the transfer of some real property of Lietuvos 
bankas as a one-off measure. 
 This opinion will be published on the ECB’s website.    Done at Frankfurt am Main, 7 December 2011. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI 
                                                 
10  Paragraphs 4.3.1 and 4. 3.2 of Opinion CON/2011/91. 
11  Paragraph 4.3.1 of Opinion CON/2011/91.