VILNIUS - On February 12, the Board of the Bank of Lithuania restricted activities of Ukio Bankas. Ukio Bankas assets worth of 1.9 billion litas (550.2 million euros) and insured deposits worth of 2.7 billion litas were transferred to Siauliu Bankas. The difference between assets and liabilities stands at 800 million litas. The state-owned company Deposit and Investment Insurance Fund will have to cover it.
In compliance with the agreement on assets and liabilities transfer signed by Lithuania-based bank Ukio Bankas, Lithuania-based bank Siauliu Bankas and State undertaking Deposit and Investment Insurance, all the clients’ securities that used to be kept with Ukio Bankas, were transferred to Siauliu Bankas, the bank Siauliu Bankas said in a statement.
The clients will be able to use the system of the Internet trading of securities through Et Bankas under the previous fees.
The securities of the funds managed by Ukio Banko Investiciju Valdymas have not been transferred to Siauliu Bankas. The shares and bonds of Ukio Bankas will remains with Ukio Bankas.
According to the Law on Banks of the Republic of Lithuania Siauliu Bankas took over the liabilities of Ukio Bankas to depositors clearly specified in the agreement on transfer of the part of assets and liabilities of Ukio Bankas which existed on the day of Ukio bankas’ insurance event and did not exceed the maximum amount of 345,280 litas per depositor insured by the State, Siauliu Bankas said in a statement.
The temporary Administrator of Ukio bankas, Adomas Audickas, confirmed that currently the final list of depositors who under the agreement will be transferred from Ukio Bankas for administration in Siauliu Bankas and who are supposed to remain in Ukio Bankas is being verified in compliance with the Law on Deposits and Liabilities to Investors of the Republic of Lithuania.
Chief Executive Officer of Siauliu Bankas Audrius Ziugzda states that “there some deposits in the list of depositors which do not meet the core of the deposit as the most conservative saving instrument bringing the least return. The maturity of some deposits exceeds 50 years and the applicable interest is more than 10 per cent per year. There are certain odd cases when the depositor will turn 107 at the deposit maturity. According to the terms applied by Ukio Bankas it was allowed to supplement such deposits at any time, they were subject to those unreasonably high interest and the interest was calculated from the interest.”
It will be verified if the all the deposits in compliance with the article 12 of the Law on Deposits and Liabilities to Investors of the Republic of Lithuania have been subject to the deposit insurance. “The participation of the insurance company in funding of the transfer of the bank’s assets, rights, transactions and liabilities is equaled to the payment of insurance benefit to the bank’s depositors and investors, therefore, those deposits that are subject to restriction of the insurance benefits ought to remain with Ukio Bankas,” said the head of the State undertaking Deposit and Investment Insurance Aurelija Mazintiene.
The restrictions of the pay outs of insurance benefits are applied to the deposits the interest rate of which more than twice exceeds the internet rate fixed to the adequate deposits at the same credit institution, also, to the bank’s borrowers’ deposits if the debts of these persons to the bank exceed the amount of deposits, to the deposits the funds of which are gained illegally, to the deposits transferred after the day of insurance event, etc.
If it appears that the deposit was uninsured, Siauliu Bankas will have a right to return such deposits to Ukio Bankas and if the competent authorities establish that such a deposit was placed from the funds of the indefinite origin or there are suspicions of illegal enrichment - in extreme cases such funds can be constrained. It is expected that the list of transferable deposits can be corrected over the next five months.
In this case the depositor could claim for his deposit amount alongside with other creditors of Ukio Bankas after announcement of bankruptcy.
Chief Executive Officer of Siauliu Bankas Audrius Ziugzda emphasizes that “not only the insurance of the deposits shall be verified but also whether their conditions are legal and enforceable”. It will be assessed if the conditions of the particular deposits do not contradict with the Law on Banks, the Civil Code and other legal acts as it provided the preferential conditions only to the part of the depositors which contradict with the core of deposits or if such conditions do not contradict with the public order or objectives of the bank’s prudential performance, etc. If the illegal deposit conditions were established, then it is planned to apply the law enforcement authorities for investigation of the circumstances of conclusion of agreements of such deposits (legacy of acquisition).
The NASDAQ OMX Group announced that Lithuanian bank Siauliu Bankas was approved as a member of NASDAQ OMX Tallinn and NASDAQ OMX Riga, effective from March 20, 2013.
As Siauliu Bankas has already been a member of NASDAQ OMX Vilnius, it became the 24th pan-Baltic member. A membership of NASDAQ OMX Baltic Market covering all three Baltic exchanges gives Siauliu Bankas and its clients’ direct access to trading in shares of 80 companies, 25 corporate bonds, 40 government securities issues and 8 funds listed on the Baltic Market.
“We are happy to see Siauliu Bankas extending its reach across the Baltics and trust that its clients will benefit from an efficient and smooth access to trading in the Baltic securities,” said Daiga Auzina-Melalksne, Head of Exchange Services at NASDAQ OMX Baltic Market.
NASDAQ OMX Vilnius Management Board has resolved to terminate Ukio bankas membership on NASDAQ OMX Vilnius, also as of March 20, 2013, the stock exchange said in a statement.
The newest Lithuanian financial market data show that the market participants positively assessed the solution chosen by the Bank of Lithuania to deal with the problem of Ukio Bankas, the national bank of Lithuania said in a statement. The indicator that reflects the assessment of the market participants regarding the country’s financial stability - the ten-year government bond spreads, which had peaked after the operation of Ukio Bankas was suspended, quickly stabilized, while on March 19, 2013, they returned to the level at which they had been before the bank’s operation was suspended. The 2018 redeemable Lithuanian euro bonds interest rate, presently at 2.52 percent, is even less than in mid-February.
“The response of the markets confirms once more that the chosen restructuring method for the problematic bank was the most suitable and having the least effect on public finances,” says Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania. Trust in the country’s banking system is expressed through the interbank market’s interest rate, which remained stable both after the suspension of the operation of Ukio Bankas, and after the proposal and implementation of means to deal with the crisis. For example, the three-month term VILIBOR interest rate in January was a low 0.47 percent, and since then has not changed.
The effect of the suspension of the operation of Ukio Bankas on the country’s financial stability was assessed also by the international ratings agency Standard & Poor’s, which has noted that the decision of the Bank of Lithuania to terminate the operating license of Ukio Bankas will have no effect on Lithuania’s ratings. Standard & Poor’s indicated that they don’t believe that the bank’s restructuring will impact the financial stability of Lithuania’s banking system, since Ukio Bankas occupied less than eight percent of the market, if calculating the resident deposits.