The EBRD is supporting plans by Siauliu Bankas to take over selected core banking assets of Ukio Bankas after the decision of the Bank of Lithuania, the country’s national bank, on Tuesday to suspend Ukio Bankas’s operations.
“We welcome this swift move as a decisive step towards the consolidation of the local banking sector and the strengthening of its stability. This will help overcome uncertainty and bolster trust and confidence in the whole sector,” said Jean-Marc Peterschmitt, EBRD Managing Director, Central and South Eastern Europe.
The EBRD is the single-largest shareholder in Siauliu Bankas with a 19.6 per cent stake. Siauliu Bankas has announced its intention to pursue opportunities to acquire the good assets and insured deposits of Ukio Bankas, a move approved by the bank’s Supervisory Council yesterday. Bank of Lithuania has welcomed the statement saying this could be “one of the options” for a swift resolution of the current problems.
Ukio Bankas was Lithuania’s fourth-largest bank in terms of deposits and the sixth-largest bank in terms of total assets. Bank of Lithuania on Tuesday temporarily suspended the bank’s operations because of excessive risk-taking and insufficient financial clarity. The goal of this step, the central bank added, was to secure “the stability of the financial system” in Lithuania.
At the same time a temporary administrator was appointed yesterday with the task of analysing the situation at Ukio Bankas in detail and protecting the interests of the bank’s depositors and customers. The administrator has been instructed “to present to Bank of Lithuania his conclusion and proposals no later than six days” from the date of his appointment.
As a first step in support of Siauliu Bankas’s efforts, the EBRD has agreed to provide subordinated debt which will strengthen the bank's capital base for the potential transfer of assets. In the current situation the EBRD considers the preservation of stability in Lithuania’s banking sector to be critical. The expansion of Siauliu Bankas by taking over Ukio’s Lithuanian banking business would provide private and commercial customers with comfort and address concerns about the stability and safety of the sector, the EBRD believes.
In its most recent strategy for Lithuania, published in November 2012, the EBRD said it would aim to “enhance the governance and the financial strength of local banks, possibly through assistance in consolidation". The Bank also states that it would "consider opportunities to play an active role in the process".