OREANDA-NEWS. October 28, 2009. A meeting of the students, lecturers and politicians with the Chairman of the Board of the Bank of Lithuania, Reinoldijus Sarkinas and the Minister of Finance, Ingrida Simonyte was held at the Mykolas Romeris University in Vilnius. In their discourses and answers to the questions the present state of Lithuania’s finance was discussed, the activities of commercial banks were dealt with, etc., reported the press-centre of Bank of Lithuania.

According to Reinoldijus Sarkinas, the economic recession and rising unemployment in the country have affected the financial standing of bank borrowers and their ability to recover their loans. This has been exerting a negative effect on the loan portfolios of banks and making them evaluating not only the incurred but also likely losses, and preparing for them. Over nine months of 2009 the specific provisions of banks for depreciated loans amounted to some LTL 3.1 billion, and the liabilities to banks of bankrupt enterprises or those under restructuring stood at some LTL 1.6 billion in early October 2009.

”I hope, our banks will survive through this hard moment and will intensify their crediting“, Reinoldijus Sarkinas said.

According to him, domestic banks have prepared adequately for the crisis having formed a sufficiently solid capital base. The capital adequacy ratio of the domestic banking system, as was previously the case, was above 13 per cent in early October 2009, while the established ratio is 8 per cent, thus banks are able assume additional asset risk in the amount of LTL 29.5 billion. Bank shareholders equity made up LTL 5.9 billion on 1 October 2009. According to the data as of 1 October 2009, without prejudice to the capital adequacy ratio, banks are able to absorb extra LTL 2.2 billion credit risk losses.

The Chairman of the Board of the Bank of Lithuania mentioned that Lithuania had been one of the few European Union countries not in need of assistance from the state or the central bank so far to ensure the stability of commercial banks.

Reinoldijus Sarkinas also spoke about the supervision of commercial banks, noting that inspection of credit institutions mainly focuses on the areas of activity involving the highest risk - it is checked how credit, liquidity, market and operational risks are managed and whether the management of these risks is efficient. However, the resolution of mutual disputes between banks and their customers in accordance with the legislation has not been assigned to the competence of the Bank of Lithuania.

According to him, commercial banks tend to negotiate with their customers when these face difficulties in recovering their loans. “Many agree on new terms. Banks are not interested in destroying business, in enterprise bankruptcies. If a businessman has a good business plan, he will get a credit from a bank”, Reinoldijus Sarkinas said.