ECB Opinion on Liquidity Assistance by Bank of Lithuania Amid COVID-19
ECB published an opinion on the provision of emergency liquidity assistance by Bank of Lithuania. The opinion was issued in response to a request from the Bank of Lithuania for an opinion on a draft law. The purpose of the draft law is to enable Bank of Lithuania to extend emergency liquidity assistance (ELA) beyond only credit institutions to a broader range of financial institutions experiencing temporary liquidity problems. The flexibility of the provision of emergency liquidity assistance by Bank of Lithuania (introduced in the draft law) is of particular relevance in context of the ongoing COVID-19 pandemic.
The draft law expands the range of institutions to which Bank of Lithuania may grant loans secured by adequate collateral, in accordance with the terms and conditions established by Bank of Lithuania, to include financial institutions and insurance and reinsurance undertakings. ECB welcomes that the draft law confirms that emergency liquidity assistance should be provided without prejudice to the requirements derived from Bank of Lithuania’s participation in the ESCB. ECB notes the possibility under the draft law for Bank of Lithuania to provide emergency liquidity assistance to non-bank financial institutions in Lithuania experiencing liquidity problems. This inclusion of financial institutions in the list of potential emergency liquidity assistance recipients is consistent with the Eurosystem Agreement on emergency liquidity, which explicitly refers to the possible provision of emergency liquidity assistance by a national central bank to a financial institution or a group of financial institutions facing liquidity problems.
In view of compliance with the monetary financing prohibition under Article 123 of the Treaty, it is reiterated that emergency liquidity assistance may only be extended to illiquid but solvent credit institutions or financial institutions. With regard to financial independence, ECB recalls that a national central bank within the ESCB is required to have sufficient financial resources not only to perform its ESCB-related tasks but also its national tasks, including the provision of emergency liquidity assistance. Member states may not put their national central banks in a position where they have insufficient financial resources and inadequate net equity to carry out their ESCB or Eurosystem-related tasks, as applicable. Losses incurred by an national central bank in the exercise of its national tasks could negatively impact the exercise of ESCB-related tasks.
Related Link: ECB Opinion (PDF)
Keywords: Europe, Lithuania, Banking, Insurance, Securities, COVID-19, Emergency Liquidity Assistance, Bank of Lithuania, ESCB, ECB
Featured Experts
Victor Calanog, Ph.D.
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous Article
CBB Introduces Regulatory Measures to Address Impact of COVID CrisisNext Article
IAIS Publishes Newsletter for March 2020Related Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
