Opinion of the European Central Bank of 30 March 2020 on the provision of emergency liquidity assistance by Lietuvos bankas (CON/2020/11)
Date: 2020-03-30
Institutions: European Central Bank
Subjects: Lithuania, central bank, financial institution, financial solvency, financial stability, liquidity control, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 30 March 2020  

on the provision of emergency liquidity assistance by Lietuvos bankas  

(CON/2020/11)  

Introduction and legal basis 

On  26  March  2020  the  European  Central  Bank  (ECB)  received  a  request  from  Lietuvos  bankas  for  an 
opinion on a draft law initiated by Lietuvos bankas to amend the Law on the Lietuvos bankas1 (hereinafter 

the ‘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  and  sixth  indents  of  Article 2(1)  of  Council  Decision 
98/415/EC2,  as  the  draft  law  relates  to  Lietuvos  bankas  and  rules  applicable  to  financial  institutions 

insofar  as  they  materially  influence  the  stability  of  financial  institutions  and  markets.  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 purpose of the draft law is to enable Lietuvos bankas to extend emergency liquidity assistance 

(ELA)  beyond  only  credit  institutions  to  a  broader  range  of  financial  institutions  experiencing 

temporary  liquidity  problems.  As  noted  in  the  explanatory  memorandum  accompanying  the  draft 

law, access for a wider range of financial market participants to ELA will contribute to the business 

continuity of those institutions when they are solvent but face temporary liquidity problems and are 

unable to borrow from the market due to a disruption in financial markets. This will contribute to the 

overall maintenance of financial stability in Lithuania.  

1.2  The draft law expands the range of institutions to which Lietuvos bankas may grant loans secured 

by  adequate  collateral,  in  accordance  with  the  terms  and  conditions  established  by  Lietuvos 

bankas, to include financial institutions and insurance and reinsurance undertakings. As clarified in 

the  explanatory  memorandum,  this  means  that  under  the  draft  law  Lietuvos  bankas  may  grant 

loans  to  not  only  credit  institutions  but  also  to  payment  institutions,  electronic  money  institutions, 

and companies providing securities, insurance, leasing and other financial services.  

1  

2  

1994  m.  gruodžio  1  d.  Lietuvos  Respublikos  Lietuvos  banko  įstatymas  Nr.  I-678,  Valstybės  žinios,  1994,  Nr.  99-
1957, 2001, Nr. 28-890 (su vėlesniais pakeitimais ir papildymais). 
Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
 
                                                 
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1.3  The draft law retains the existing requirement that Lietuvos bankas may grant such loans without 

prejudice to the requirements derived from Lietuvos bankas’ participation in the European System 

of Central Banks (ESCB), and notably those resulting from operations on behalf of public entities.  

1.4  As  noted  in  the  explanatory  memorandum,  the  draft  law  is  particularly  relevant  to  the  current 

situation  in  which  quarantine  has  been  enforced  in  Lithuania,  which  may  cause  the  financial 

situation  of  financial  market  participants  and  other  persons  dependent  on  their  activities  to 

deteriorate. The explanatory memorandum also notes that the right of a central bank to grant loans 

to a broader range of financial institutions other than credit institutions is provided for in the central 

bank  laws  of  other  Member  States,  including  Belgium,  Germany,  Greece,  Ireland,  Latvia  and 

Slovenia. 

2. 

Observations  

2.1  The provision of ELA refers to the provision by a Eurosystem national central bank (NCB) of central 

bank  money  and/or  any  assistance  that  may  lead  to  an  increase  in  the  provision  of  central  bank 

money  to  a  solvent  financial  institution  or  a  group  of  solvent  financial  institutions  that  faces 
temporary liquidity problems, where this operation is not part of the single monetary policy3.  

2.2  The  ECB  welcomes  that  the  draft  law  confirms  that  ELA  should  be  provided  by  Lietuvos  bankas 

without prejudice to the requirements derived from Lietuvos bankas’ participation in the ESCB, thus 

providing a safeguard to ensure compliance with the requirements relating to the provision of ELA 

by NCBs in the ESCB pursuant to the Treaty and the Statute of the European System of Central 
Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’)4. 

2.3  The ECB notes the possibility under the draft law for Lietuvos bankas to provide ELA to non-bank 

financial  institutions  in  Lithuania  experiencing  liquidity  problems.  The  inclusion  of  financial 

institutions  in  the  list  of  potential  ELA  recipients  is  consistent  with  the  Eurosystem  Agreement  on 

emergency liquidity, which explicitly refers to the possible provision of ELA by an NCB to a financial 
institution or a group of financial institutions facing liquidity problems5. The flexibility of the provision 

of ELA  by  Lietuvos bankas introduced by the draft law  is of particular relevance in the context of 

the ongoing COVID-19 pandemic.  

2.4  The responsibility for the provision of ELA lies with the NCB concerned. This means that any costs 

and risks arising from the provision of ELA are incurred by the relevant NCB. However, pursuant to 

Article  14.4  of  the  Statute  of  the  ESCB,  the  Governing  Council  of  the  ECB  may  restrict  ELA 

operations if it finds that these interfere with the objectives and tasks of the ESCB. The Governing 

Council must be informed of such operations in a timely manner in order for it to adequately assess 

such interference. A procedure to this end has been in place since 1999 and its key features are 

3  

4  

5  

See paragraph 1.2 of the Eurosystem Agreement on emergency liquidity assistance (17 May 2017), available on the 
ECB’s website at www.ecb.europa.eu. 
See  paragraph  10  of  Opinion  CON/2005/60.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

See paragraph 1.2 of the Eurosystem Agreement on emergency liquidity assistance (17 May 2017). 

2 

 
                                                 
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summarised  in  the  Eurosystem  Agreement  on  Emergency  Liquidity  Assistance  of  17  May  2017 6. 

Strict compliance with the ELA procedures is of utmost importance. 

2.5 

In view of compliance with the monetary financing prohibition under Article 123 of the Treaty, it is 

reiterated  that  ELA  may  only  be  extended  to  illiquid  but  solvent  credit  institutions  or  financial 

institutions.  The  financing  by  an  NCB  of  insolvent  credit  institutions  or  financial  institutions  would 

not  be  compatible  with  the  monetary  financing  prohibition  since  the  financing  of  insolvent  credit 
institutions or financial institutions constitutes a government task 7. 

2.6  With regard to financial independence, as required  of an ESCB central bank under Article 130 of 

the  Treaty,  the  ECB  recalls  that  an  NCB  within  the  ESCB  is  required  to  have  sufficient  financial 

resources  not  only  to  perform  its  ESCB-related  tasks  but  also  its  national  tasks,  including  the 

provision of ELA. Member States may not put their NCBs in a position where they have insufficient 

financial resources and inadequate net equity to carry out their ESCB or Eurosystem-related tasks, 

as  applicable.  Losses  incurred  by  an  NCB  in  the  exercise  of  its  national  tasks  could  negatively 

impact  the  exercise  of  ESCB-related  tasks.  As  a  consequence,  the  NCB  may  not  have  sufficient 

financial  resources  to  perform  the  ESCB-related  tasks  required  of  it  under  the  Treaty  and  the 

Statute  of the  ESCB. For  all these reasons, financial independence under the  Treaty  implies that 
an NCB should always be sufficiently capitalised 8. 

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

Done at Frankfurt am Main, 30 March 2020. 

[signed] 

The President of the ECB 

Christine LAGARDE 

6  
7  

8  

The ECB/ Eurosystem Agreement on emergency liquidity assistance (17 May 2017). 
See  paragraph  2.1  of  Opinion  CON/2016/55;  paragraph  5  of  Opinion  CON/2013/26;  paragraph  4.1  of  Opinion 
CON/2008/58 and paragraph 4.2 of Opinion CON/2008/46.  
See  ECB  Convergence  Report  2018,  p.  25,  available  on  the  ECB’s  website  at  www.ecb.europa.eu;  see  also 
paragraph  2.5  of  Opinion  CON/2016/55;  paragraph  2.1  of  Opinion  CON/2012/69  and  paragraph  3.3  of  Opinion 
CON/2014/24. 

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