Opinion of the European Central Bank of 30 May 2011 on financial market supervisory reform in Lithuania (CON/2011/46)
Date: 2011-05-30
Institutions: European Central Bank
Subjects: Lithuania, central bank, consumer protection, counterfeiting, financial market, financial stability, financial supervision, national law

EN 

ECB-PUBLIC 

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  financial  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  consultation  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 addition, 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, the 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 authority 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  Securities  Commission,  responsible  for  prudential 

supervision  and  the  conduct  of  business  in  capital  markets,  and  the  Insurance  Supervision 

Commission,  responsible  for  prudential  supervision  and  the  conduct  of  business  in  insurance 

markets (hereinafter referred to collectively 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 confers on Lietuvos bankas 

the task of contributing to the maintenance of the 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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1.3  According to the draft laws, contributions by financial 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 entrusted 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 market supervisory reform, the draft amending law also transposes some 

Union legislation.  

1.5.1  In  accordance  with  Council  Regulation  (EC)  No  45/2009  of  18  December  2008  amending 

Regulation  (EC)  No  1339/2001  extending  the  effects  of  Regulation  (EC)  No  1338/2001  laying 

down  measures  necessary  for  the  protection  of  the  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  Directives  2005/60/EC  and  2006/48/EC  and  repealing 
Directive  2000/46/EC3,  Lietuvos  bankas  is  to  be  entrusted  with  supervising  electronic  money 

institutions. 

2.   General observations 

2.1  The  ECB  understands  that  Lietuvos  bankas,  the  Ministry  of  Finance  and  other  supervisors4  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  for  concentrating  supervisory  responsibilities  in  a 
single authority6.  

2.2  The  ECB  considers  that  the  proposed  extension  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  prudential  supervision  of  all  financial  market 

2  
3  
4  
5  

6  

OJ L 17, 22.1.2009, p. 4. 
OJ L 267, 10.10.2009, p. 7. 
See the explanatory memorandum to the draft laws. 
Resolution  of  the  Government  No  580  of  19  May  2010  approving  the  joining  of  authorities  supervising  the  financial 
market, Valstybės žinios, 27.5.2010, No 61-2991. 
See also Opinion CON/2005/39, paragraph 4. All ECB opinions are published on the ECB’s website www.ecb.europa.eu. 

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intermediaries to Lietuvos bankas. Faced with the increasing blurring of traditional borders between 

the  banking,  securities  and  insurance  sectors  and  the  resulting  new  challenges  to  prudential 

supervision  and  the  stability  of  the  financial  system,  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 supervisory 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  maintenance  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  system.  However,  this  aim  is  confined  to  the 
supervision of the financial market9. 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’ 
functions11, without prejudice to any oversight competence 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 acts 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  acts  should  be  adopted  in  consultation  with 

Lietuvos bankas and may not interfere with Lietuvos bankas’ own regulatory and oversight powers 

defined in the draft amending law. 

7  
8  
9  

10  
11  

12  
13  

See also Opinion CON/2005/39, paragraph 5. 
See also Opinion CON/2011/37, paragraph 3.1. 
Draft amending law (proposed draft Article 42(1) of the Law on Lietuvos bankas (‘Aim, Functions and Rights of 
Lietuvos bankas in the performance of the financial market supervision’)). 
See also Opinion CON/2005/39, paragraph 6. 
For example, Article 7 (‘main task of Lietuvos bankas’) or Article 8 (‘Lietuvos bankas’s functions and activities’) of the 
Law on Lietuvos bankas. 
For example, pp. 15 to 29 of Convergence Report, May 2010, available on the ECB’s website at www.ecb.europa.eu. 
Article 7(1) of the draft reform law. 

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3.2  Central bank independence and the monetary financing prohibition 

3.2.1  Generally, as regards the financing of the tasks 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 tasks 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 bankas 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  particular,  it  is  important  to  ensure  that  Lietuvos  bankas  defines  these 

contributions independently. 

3.2.3  Since the provisions under which an NCB becomes the legal successor to any liabilities of a distinct 

supervisory  authority  may  raise  issues  of  financial  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  welcomes  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  would  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  concerned  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 efficient 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  that  a  Commission  of  representatives  from  Lietuvos 

14  
15  
16  
17  
18  
19  
20  
21  

See the ECB’s Convergence Report, May 2010, p. 21, and notably Opinion CON/2009/93, paragraph 3.1.5.  
Draft amending law (proposed draft Article 44(1) of the Law on Lietuvos bankas). 
See for example Opinion CON/2011/5, paragraph 3.3. 
Draft amending law (proposed draft Article 44(2) of the Law on Lietuvos bankas). 
Opinion CON/2010/33, paragraph 3.2.3. 
Article 6(4) of the draft reform law. 
Article 6(3) of the draft reform law. 
Article 5(2) of the draft reform law. 

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bankas,  other  supervisors  and  the  Ministry  of  Finance  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  new  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,  Lietuvos  bankas  should  dispose  of  sufficient  human 

resources, both in terms of quantity and quality, to perform all its tasks efficiently. 

3.3   Cooperation with other authorities  

3.3.1  The  draft  amending  law  also  provides  that  Lietuvos  bankas  may  conclude  agreements  with  the 
financial  market  supervisors  of  other  countries  to  cooperate  in  financial  markets23.  The  ECB 

recommends  broadening  the  wording  of  this  provision  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 European 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 cooperation with financial supervisory 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 ability to interpret it are crucial25. 

3.4  Lietuvos bankas' consumer protection role 

3.4.1  Consumer  protection26  is  not  included  in  the  NCB  tasks  specified  in  the  Statute  of  the  European 

System of Central Banks and of the European Central 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 

Article 8(2) of the draft reform law. 

22  
23   Draft amending law (proposed draft Article 46 of the Law on Lietuvos bankas). 
24  
25  
26  
27  

See Opinion CON/2011/5, paragraph 3.10. 
See Opinion CON/2011/5, paragraph 3.10. 
Draft amending law (proposed draft Article 45 of the Law on Lietuvos bankas). 
See for example Opinions CON/2006/47, CON/2006/38, CON/2007/8 and CON/2007/29.  

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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  services  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 safeguard the soundness of the financial  market and 

preserve confidence in the marketplace. 

3.4.5  However, as previously stated by the ECB in relation to other NCBs, it is important to ensure that 

prudential supervision and investor/consumer protection have adequate and equal emphasis and that 
appropriate resources are available to ensure their performance28. 

3.4.6  The  ECB  therefore  expects  that,  when  granting  these  additional  powers  to  Lietuvos  bankas,  care 

will be taken to ensure that Lietuvos bankas’ operational 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  bankas  will  be  entrusted  with  the  supervision  of  the 

protection  of  cash  against  counterfeiting  and  the  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  resources,  both  in  terms  of  quantity  and  quality,  to 
avoid affecting Lietuvos bankas’ capacity to carry out ESCB-related tasks29.  

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 the 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  bankas  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 than ‘credit and payment institutions and other professional cash 
handlers’31. The ECB recommends aligning the national law 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  
29  
30  

31  

See Opinions CON/2006/47, CON/2006/38, CON/2007/8 and CON/2007/29. 
See also Opinions CON/2009/27 and CON/2009/40. 
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). 
Draft amending law (proposed draft Article 6(3) of the Law on Lietuvos bankas). 

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3.5.5  Finally,  the  ECB  notes  that  the  new  competence  conferred  upon  Lietuvos  bankas  regarding  the 

protection of the euro against counterfeiting converges to some extent, as regards euro banknotes, 
with  the  Eurosystem  legal  framework  on  the  verification  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 participation 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  authenticity  and  fitness  checking  and  recirculation  of  euro 
banknotes (OJ L 267, 9.10.2010, p. 1). 

7