Credit unions may pose financial system risk

VILNIUS - Lithuania’s financial system is resilient enough to handle big and unexpected shocks, reports ELTA. However, credit unions must strengthen their capability to withstand potential risks, says the Bank of Lithuania in its latest Financial Stability Report. The two possible challenges to the country’s financial system are the worsening financial situation of municipalities and unbalanced activities of credit unions.

“2012 was exceptional in one aspect. At the beginning of the year we took aggressive and radical actions,” said Vitas Vasiliauskas, chairman of the board of the Bank of Lithuania recalling the liquidation of Ukio Bank and some credit institutions during the presentation the Financial Stability Report on Wednesday.

According to Vasiliauskas, the main prudential indicators were that the capital of banks was two times larger than requested and banks held larger than the required liquidity reserves. The Bank of Lithuania states that in 2012, the loan portfolio increased by more than 1 percent, or 17 million litas (5 million euros), and banks were more in favor of lending.