News: Establishment of a Specialized Bank in Lithuania

Establishment of the Specialized Bank in Lithuania

Since January 1, 2017, Lithuania has introduced a new type of banking institution, such as the Specialized Bank.

This unique Banking institution is designed to create a favorable environment for start-ups seeking to provide financial services in the European financial market.

The Specialized Bank allows to provide almost all the traditional banking services in the EU and ensures access to the European financial market.

Main characteristics

Authorized capital: 1 million euros

Specialized bank provides all traditional banking services, namely:

• Crediting (including loan agreements relating to real estate);
• Payment for services;
• Issuance and administration of traveler's cheques;
• Accepting deposits and other repayable funds;
• Currency exchange;
• Issuance of electronic money;
• Issuance of guarantees/warranties and bonds;
• Fund administration;
• Financial leasing;
• Financial intermediation;
• Assessment of the creditworthiness of services;
• Safe deposit box.

The Specialized Bank is limited in the provision of the following services:

- provision of investment services;
- management of investment and pension funds;
- provision of other services related to the issue of securities.

It is possible to register a separate brokerage and investment company or obtain full-fledged license to carry out banking activities.

Advantages of Lithuania as banking jurisdiction in the EU / EEA:

- Fast licensing process. Issuance of license takes place within 6 months.
- There are no regulatory sanctions for minor violations during the first year of operation.
- Low corporate tax rates in the EU.
- Direct access to the unified payment zone in the EU / EEA financial markets.
- Clients’ deposits in the amount of up to 100 000 euros are secured in accordance with EU rules.

Requirements to the management bodies and their key functions

1. The members of the Management Board and the Supervisory Board must have higher education and good reputation.
2. At least two members of the management board (including the chairman) must meet the following requirements:

• higher education in the field of jurisprudence, management, business administration or economics.
• work experience at managerial positions for at least 3 years, or for a total of 3 years during 5 years (general director or deputy director) in financial institutions or their subdivisions (Department, office, branch, etc.). One of the members of the management board must have at least 3 years of experience at managerial positions in Lithuania.

3. Other deputies must have higher education.
4. The staff of the Internal audit service should have degree in the field of jurisprudence, management, business administration or economics.
5. Additional requirements also apply to the heads of the branch and the representative office, as well as to other employees of the bank who are authorized to take decisions related to financial services, to conclude contracts containing elements of risk on behalf of the bank.

Documents required for obtaining a Specialized Banking License

Draft of constituent documents:

• Documents confirming the formation and availability of the authorized capital;
• Programme of activities (based on the business plan and information from the client);
• Operational plan for the next 3 years with financial forecasts;
• Information about the managers, shareholders, information about the experience and impeccable reputation;
• Description of the management system, risk management, IT systems and policies, accounting system and reporting policies;
• Organizational structure of the profile;
• Description of the internal control system, internal audit, prevention of compliance violations, hiring, outsourcing, conflict of interest management, rules for raising deposits, credit policies and procedures, rules for assessing solvency, consideration of complaints, etc.

Licensing and Registration Process

1. Preparation of the package of documents for submitting application for the Specialized License of the Bank. The process can take from 1 to 4 months or more, depending on the cooperation of shareholders and related parties.
2. Selection of the Board of Directors, the General Director, the Supervisory Board, the Auditor, the Head of the Supervisory Department, the heads of the branches, and other key employees. Informing the Central Bank about selected candidates.
3. Submission of prepared documents on activities, business, strategic plans and other documents related to submission, together with data on the managers and shareholders of the specialized bank to the Central Bank. The license is issued within 6 months after the filing of all necessary documents, and the extension of the period is not allowed. The European Central Bank considers the documents and authorizes the issuance of license.
4. The Strategic Commission, established in the Government of Lithuania, should approve the founders, and the foregoing should be consistent with the interests of national security. The process takes up to 1 month and can be carried out in parallel with licensing.

5. After obtaining the license of the Specialized Bank, the Bank is registered in the register of legal entities. Management is appointed after the Central Bank approves their candidatures in the licensing process.
6. Registration of the company and obtaining the license number usually takes from 1 to 2 weeks after the decision of the Council of the Central Bank.

For more information, please contact Law & Trust International. Consultations are possible by phone, through chat or during personal conversation in the office of the company.