VILNIUS - The Bank of Lithuania has slashed the required reserve levels of banks from 6 percent to 4 percent.
The move is expected to release approximately 1 billion litas (290 million euros) of additional funds into the market.
"We are satisfied with the current situation in the crediting market, butthis decision will perhaps help to make crediting somewhat more active andwill provide some kind of support to commercial banks," ReinoldijusSarkinas, the chairman of the Bank of Lithuania's board, told BNS.
"I could not say that because of this decision alone banks will cutinterest rates on loans, but this would be a step into this direction aswell," he said.
The central bank's board took the decision to reduce the requiredreserves ratio on Thursday. "In view of the economic slowdown in thecountry, the Bank of Lithuaniais releasing a part of banking resources andcreating more flexible liquidity management conditions for banks," thecentral bank said in a press release.
The required reserves ratio will have to be reduced to 2 percent by thetime Lithuaniain order for the country to adopt the euro.
The last time the Bank of Lithuaniacut the ratio was in March 2002, to 6percent from 8 percent.