Having assessed the inspection report, as well as other data gathered for supervision purposes, and aiming to protect the interests of the general public, depositors and other customers, the Board of the Bank of Lithuania declared the temporary restriction of the operation of AB Ūkio bankas. A temporary administrator, appointed by the Board, is authorized to propose decisions that would enable ensuring of the compliance of obligations to the bank’s clients.
The decision of the Board of the Bank of Lithuania to restrict the bank’s operation was made after assessing the risky tendencies of Ūkio bankas in recent years, actions of shareholders that were harmful to the bank, non-compliance with the instructions of the Supervision Service, and the consequent rising threat to the stable and reliable operation of the Bank. The decision was approved once it was clear that the other statutory enforcement measures would not be sufficient in ensuring the security of the interests of depositors and the general public.
During the inspections of Ūkio bankas in December 2012–January 2013 it was established that the bank performed risky activities, inappropriately assessed credit risks, in not all cases made sure of the borrower’s possibilities to fulfil debt obligations, didn’t form enough specific provisions for problem loans, applied unacceptable methods of portraying transactions in accounting, and also violated prudential legal acts.
Having assessed the data collected during the inspection, it was established that, in forming suitable specific provisions for problem loans and properly evaluating the other assets, the net value of Ūkio bankas would be less than was declared in the reports presented to the Supervision Service, and the bank wouldn’t perform the prudential requirements related to the capital. In addition, based on the data presented to the Bank of Lithuania, on 12 February Ūkio bankas no longer complies with the liquidity ratio.
The shareholders of Ūkio bankas and the management did not fulfil the loan restructuring plan, disregarded the Bank of Lithuania’s order to essentially reduce the part of the loan portfolio related to the main shareholder, or they only formally complied. Particularly the loans issued to companies related to the main shareholder make up the largest part of the problem loan portfolio.
Ever after several repeated demands, the Bank of Lithuania did not receive data that could prove that Ūkio bankas’ main shareholders are ready to ensure reliable management of the bank and had real opportunities to strengthen the bank’s capital and remove the other deficiencies in the bank’s operation.
The deficiencies in the bank’s operation and violations of legal acts have been established more than once. However, as was revealed in the information collected during the last inspection, the earlier requirements set for the bank to improve the quality of its assets, strengthen the capital base, and curtail operation risks, were not fulfilled.
Having assessed all the circumstances related to the operation of Ūkio bankas, in observance of the Republic of Lithuania’s Law on Banks and aiming for stability of the financial system, the Board of the Bank of Lithuania adopted the decision to announce the restriction of the activities of AB Ūkio bankas and appointed a temporary administrator, Adomas Audickas.
According to the Law on Banks, the administrator has the function of the bank’s supervisory board, the management and administration. He is authorized to assess in detail the financial standing of Ūkio bankas and carry out adequate and effective actions to protect the interests of the bank’s depositors and customers. Taking into account the need to find a solution to the problem as soon as possible, the administrator is instructed to present to the Bank of Lithuania his conclusion and proposals no later than six days from the date of taking the decision.
Temporarily, until it is decided what means will be used to find a solution to the problems of Ūkio bankas, the bank will not be providing financial services.
The Bank of Lithuania stresses that the enforcement measures applied to Ūkio bankas are solely related to this bank only. All other banks operating in Lithuania and foreign bank branches implement prudential requirements and there is no risk to their stability. The obligations of Ūkio bankas to other banks and credit unions operating in the country are insignificant.