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Published: 12 june 2013 12:13

Central Bank governor confident that Lithuania’s banks would weather recession

Vitas Vasiliauskas
Irmanto Gelūno / 15min nuotr. / Vitas Vasiliauskas

Lithuania’s banks would weather economic recession and would continue to comply with capital adequacy requirements, Vitas Vasiliauskas, the governor of the central Bank of Lithuania, has said.

However, he warned that growing debts of local authorities and the expansion of credit unions posed threats to the domestic financial system.

The central bank has evaluated the response from banks to tentative risks, including a decline in exports, sensitivity to risks in the Nordic countries, and low long-term interest rates, in its latest Financial Stability Review, Vasiliauskas has said at a news conference on Wednesday.

“The banking system would weather economic stresses. I mean capital adequacy, the existing capital buffer would suffice to cover potential losses. It should not come as a surprise since the system was successful enough in withstanding the effects of natural developments related to Snoras and Ūkio Bankas, and the exit of certain credit unions,” he said.

Recession in EU and slowdown in Russia

Recession in the euro zone is getting worse and is likely to last longer than expected, while Russia’s economy is slowing down fast, analysts of the central Bank of Lithuania have said.

A decline in Lithuania’s exports would prompt its companies to cut down on investment, reduce lower-productivity workforce or wages, the central bank warns.

Moreover, the number of corporate and household insolvencies would increase, the bank said in its latest Financial Stability Review.

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