Opinion of the European Central Bank of 24 March 2009 at the request of Lietuvos bankas on behalf of the Ministry of Finance of Lithuania on a draft law amending the Law on Lietuvos bankas as regards the rules on the distribution of the profits of Lietuvos bankas (CON/2009/26)
Date: 2009-03-24
Institutions: European Central Bank
Subjects: Lithuania, central bank, financial stability, financial year, national budget, profit

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 24 March 2009  

at the request of Lietuvos bankas on behalf of the Ministry of Finance of Lithuania 

on a draft law amending the Law on Lietuvos bankas as regards the rules on the distribution of the 

profits of Lietuvos bankas 

(CON/2009/26) 

Introduction and legal basis 

On 13 March 2009 the European Central Bank (ECB) received a request from Lietuvos bankas on behalf 

of  the  Ministry  of  Finance  of  Lithuania  for  an  opinion  on  a  draft  law  amending  the  Law  on  Lietuvos 

bankas as regards the rules on distribution of the profits of Lietuvos bankas (hereinafter the ‘draft law’).  

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 

on  the  consultation  of  the  European  Central  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 European Central Bank, the Governing Council has adopted 

this opinion. 

1.  

Purpose of the draft law 

1.1  The draft law provides that Lietuvos bankas should contribute, extraordinarily, 100 % of its profit 

for the financial year 2008 to the State budget, instead of 50 % of its profit as currently provided 

for in the Law on Lietuvos bankas. The contribution to the State budget is to be made only after 

making a deduction to cover any losses carried forward from previous financial years. 

1.2  According to Article 23(3) of the Law on Lietuvos bankas, the profit for a financial year is to be 

allocated: first, to cover losses carried forward from previous financial years; second, to contribute 

to the State budget 50 % of the profit of Lietuvos bankas for the financial year, or a part thereof 

remaining after covering losses carried forward from previous financial years; and third, after the 

first and the second allocations, the part of the profit remaining is to be transferred to the authorised 

and/or  reserve  capital.  If  the  amount  required  to  enable  the  authorised  capital  to  reach 

200 million litai  (about  EUR  58  million)  is  less  than  the  amount  available,  then  the  required 

1  

OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
                                                 
amount  is  allocated  to  the  authorised  capital,  and  the  residual  amount  is  allocated  to  the  reserve 

capital. 

1.3 

If the draft law is adopted, Lietuvos bankas will have no funds to transfer to the authorised and/or 

reserve capital for 2008. 

2. 

General observations  

2.1  The  national  legislation  of  a  Member  State  must  be  fully  compatible  with  the  institutional  and 

financial  independence  of  Lietuvos  bankas,  thus  ensuring  the  proper  performance  of  Lietuvos 

bankas’s tasks under the Treaty and the Statute of the European System of Central Banks and of the 

European Central Bank (hereinafter the ‘Statute of the ESCB’). In particular, the compatibility of 

the Law on Lietuvos bankas with the requirements of Article 108 of the Treaty and the provisions 

of  the  Statute  of  the  ESCB  concerning  central  bank  independence  is  of  utmost  importance,  as 

Lietuvos  bankas’s  primary  objective  of  price  stability  is  best  served  by  a  fully  independent 
institution  with  a  precisely  defined  mandate2.  The  proposed  amendment  raises  concerns  with 

respect to the institutional and financial independence of Lietuvos bankas. 

2.2  The principle of institutional independence is expressly referred to in Article 108 of the Treaty and 

Article  7  of  the  Statute  of  the  ESCB,  which  prohibit  the  national  central  banks  (NCBs)  and 

members  of  their  decision-making  bodies  from  seeking  or  taking  instructions  from  Community 

institutions or bodies, from any government of a Member State or from any other body. In addition, 

these provisions prohibit Community institutions and bodies and the governments of the Member 

States  from  seeking  to  influence  the  members  of  the  decision-making  bodies  of  the  NCBs  in  the 
performance of their tasks related to the European System of Central Banks (ESCB)3. 

Therefore the rights of third parties to give instructions to NCBs, their decision-making bodies or 

their members are incompatible with the Treaty and the Statute of the ESCB as far as ESCB-related 

tasks are concerned. 

2.3  The  concept  of  financial  independence  should  be  assessed  from  the  perspective  of  whether  any 

third party is able to exercise either direct or indirect influence not only over the tasks of an NCB, 
but also over its ability - understood both operationally in terms of manpower4, and financially in 

2 

3  
4

See  ECB  Opinion  CON/2007/14  of  24  May  2007  at  the  request  of  the  Hungarian  Ministry  of  Finance  on  a  draft  law 
amending  the  Law  on  the  Magyar  Nemzeti  Bank.  All  ECB  opinions  are  available  on  the  ECB’s  website  at 
www.ecb.europa.eu. 
See the ECB’s Convergence Report May 2008, p. 18. 
See  ECB  Opinion  CON/2008/9  of  21  February  2008  at  the  request  of  the  German  Ministry  of  Finance  on  a  draft  law 
amending the Law on the Deutsche Bundesbank; ECB Opinion CON/2008/10 of 21 February 2008 at the request of the 
Italian  Ministry  of  Economic  Affairs  and  Finance  on  some  provisions  of  the  Law  on  the  State  annual  and  pluriannual 
budget  (2008  Budget  law);  ECB  Opinion  CON/2008/34  of  4  August  2008  at  the  request  of  the  Swedish  Ministry  of 
Finance  on  a  report  concerning  the  financial  independence  of  Sveriges  Riksbank;  ECB  Opinion  CON/2008/82  of 
2 December  2008  at  the  request  of  the  Spanish  State  Secretary  for  Economic  Affairs  on  a  draft  royal  decree  on  the 
arrangements for paying the Banco de España’s profits to the Treasury; ECB Opinion CON/2009/4 of 16 January 2009 at 
the  request  of  the  Belgian  Minister  for  Finance  on  a  draft  law  amending  the  financial  provisions  of  the  Law  of 
22 February 1998 establishing the Organic Statute of the Nationale Bank van België/Banque Nationale de Belgique.  

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terms of appropriate financial resources - to fulfil its mandate. The NCBs must also, at all times, 

have  sufficient  financial  means  to  carry  out  their  other  functions,  i.e.  to  perform  their  national 

tasks, to meet their international obligations and properly cover their administrative and operational 

expenses. With regard to profit allocation, an NCB’s statutes may prescribe how profits are to be 

allocated. In the absence of such provisions, the decision on allocation of profits should be taken by 

the  NCB’s  decision-making  bodies  on  professional  grounds,  and  should  not  be  subject  to  the 

discretion  of  third  parties  unless  there  is  an  express  safeguard  clause  stating  that  this  is  without 
prejudice to the financial means necessary for carrying out the NCB’s ESCB-related tasks5. 

2.4 

In  addition,  the  draft  law  must  comply  with  the  monetary  financing  prohibition  laid  down  in 

Article 101(1)  of  the  Treaty  and  Council  Regulation  (EC)  No  3603/93  of  13  December  1993 

specifying definitions for the application of the prohibitions referred to in Articles 104 and 104b(1) 
[now Articles 101 and 103(1)] of the Treaty 6. As referred to in previous ECB opinions7, in order to 

comply with the monetary financing prohibition, it is of crucial importance that the distribution of 

profits  by  instalments,  or  in  full,  does  not  imply  advances  on  future  or  provisional  profits  but  is 

rather  the  result  only  of  profits  that  are  fully  realised,  accounted  for  and  audited,  which  in  turn 

requires due calculation of profits and losses. 

3. 

Specific comments  

3.1  The  draft  law  raises  concerns  regarding  its  compatibility  with  the  institutional  independence  of 

Lietuvos bankas to the extent that it can be construed as an instruction to Lietuvos bankas in the 

specific context of this legislative initiative. Indeed, the rules on the allocation of Lietuvos bankas’s 

profits are being modified on a temporary basis. In substance, this amounts to an instruction by the 

Lithuanian Parliament to deviate from the established rules on profit distribution in order to transfer 

100 % of the profits to the State.  

3.2  The  draft  law  modifies  the  rules  on  the  allocation  of  Lietuvos  bankas’s  profits  in  the  current 

financial  turmoil.  The  financial  turmoil  or  any  other  exceptional  circumstance  cannot  justify 

infringing Article 108 of the Treaty or Article 7 of the Statute of the ESCB. Notwithstanding the 

aim  of  the  draft  law,  as  specified  by  the  consulting  authority,  of  enhancing  the  stability  and 

credibility of the Lithuanian financial system, it is in any circumstances particularly important to 

ensure and strengthen the independence of Lietuvos bankas, and even more so in periods of crisis. 

Moreover, overcoming the current financial turmoil depends on the ability of central banks to carry 

out their functions independently.  

3.3  The draft law also raises concerns about the financial independence of Lietuvos bankas, as all its 

profit is to be contributed to the State budget. First, the draft law would deprive Lietuvos bankas of 

5  
6  
7  

See the ECB’s Convergence Report May 2008, p. 21. 
OJ L 332, 31.12.1993, p. 1. 
See e.g. Opinion CON/2008/82. 

3 

 
                                                 
the possibility of allocating part of the profit to its authorised and/or reserve capital. According to 

the  principle  of  financial  independence,  as  stressed  by  the  ECB  in  all  its  convergence  reports  as 

regards financial provisions or buffers, including the Convergence Report of May 2006 regarding 

Lithuania, an NCB must be free independently to create financial provisions to safeguard the real 

value  of  its  capital  and  assets.  Second,  the  draft  law  could  also  deprive  Lietuvos  bankas  of 

sufficient financial means to carry out its mandate and could impair its independent functioning.  

3.4  Finally, the provisions in an NCB’s statutes on  how profits are to be allocated are aimed  both at 

serving  central  bank  independence  and  giving  the  shareholders  legal  certainty.  Even  though 

amendments to such rules are possible, it is important to protect the rules related to the distribution 

of profit from third-party interests and to ensure a legal framework that provides a stable and long-
term basis for the central bank’s functioning8. An ad hoc change to the rules on the distribution of 

profits, which reflects a particular financial need of the main shareholder and which takes all the 

profits from the central bank, is a cause of particular concern and is not compatible with the Treaty 

or the Statute of the ESCB. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 24 March 2009. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

8  

See Opinion CON/2007/14. 

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