Lithuania’s financial system is stable, resilient and able to operate in extreme circumstances, but the global economy requires special vigilance. Such an assessment was made in the latest Financial Stability Review, delfi.lt reported on 13 June.
According to the chairman of Bank of Lithuania Vitas Vasiliauskas, evaluating how Snoras collapse affected country’s financial system – it is clear that system proved to be stable and resilient. “The system has proven to be stable and the market evaluated it by record-low interest rates,” said the chairman of Bank of Lithuania presenting Financial Stability Review of 2012.
Stability of Lithuanian finances was recognized by depositors too. In December 2011, one month after stopping Snoras, deposit system decreased only by 1.1 percent. It should be noted that recently number of deposits started to increase steadily, although the International Monetary Fund conducted 42 different analyses of financial crises in various countries and the results showed that the average decrease in deposits one month after the shock is usually hovering around 11 percent.
Financial Stability Review stated that at present the highest risk to the domestic financial system is related to external factors: prolonged Euro zone sovereign debt crisis, a significant contraction in world markets and potential price hikes of energy resources. The risk of adverse impact on Lithuania’s financial system could be posed by declining exports, rising interest rates and higher prices of energy resources. It would also affect the main debtors – businesses and households – financial position and would lead to higher credit losses of the banks.
According to Vitas Vasiliauskas, by conservatively evaluating various risks and by making the necessary provisions, the loan devaluation problems could finally be resolved. Increased capital stock would strengthen banks’ resilience to potential shocks, increase the confidence of the markets and create conditions for sustainable development of the credit in the future.