OREANDA-NEWS. October 19, 2009.

1. Information on the results of credit union inspections in Q3 2008
The Board of the Bank of Lithuania was presented the Credit Institutions Supervision Department’s information on the results of credit union inspections in Q3 2009. Full-scope inspections were conducted in three credit unions: Memelio taupomoji kasa (Klaipeda), Zemdirbio gerove (Siauliai) and Vilkaviskis credit union.

The inspections verified the compliance of the credit unions with the Republic of Lithuania Law on Credit Unions and other legal acts for the regulation of their activities, their articles of association; in addition, the removal of the deficiencies identified during the previous inspections was verified, the activities and the financial standing of credit union bodies were analysed (credit and liquidity risk management, capital).

The inspection reports included instructions and terms for the credit unions for the elimination of identified deficiencies.

2. Amendment of the Bank of Lithuania Board Resolution No. 99 “On the Approval of the Rules for the Outsourcing of Bank Ancillary Services” of 10 June 2004

By resolution of the Board of the Bank of Lithuania, The Rules for the Outsourcing of Bank Ancillary Services were amended. They are applicable to the Central Credit Union of Lithuania, banks and foreign bank branches holding a license of the Bank of Lithuania, as well as, mutatis mutandis, credit unions and foreign bank branches licensed in the European Union Member States, established in the Republic of Lithuania, that have decided not to engage themselves in a certain activity without which provision of financial services is impossible, which helps to provide financial services or is otherwise directly related with the provision of financial services, and that intend to outsource these ancillary services from other entities.

The Rules specify the key principles to be followed by an outsourcing bank, i.e.: the basic functions of the bank’s management bodies (establishment of risk strategy, risk management policies, ongoing monitoring and control of process implementation) and the relating responsibility shall not be transferred to other individuals. Due to implemented outsourcing of ancillary services a bank’s responsibility for the implementation of the functions established in respective Republic of Lithuania laws shall not be limited; the bank shall maintain its basic competence in relation to carrying out the services outsourced so that it is able to ensure their provision in contingency.

The Rules also specify the criteria for classifying the services being outsourced into significant services and those not having significant influence. Services of such importance that their failure or default can affect a bank’s ability not only to comply with the Bank of Lithuania’s established supervisory requirements, but to ensure its business continuity, e.g. internal control, risk management system, key business information systems, shall be assigned to significant services. Services that do not directly affect the risk level assumed by a bank shall be assigned to the services that do not have significant influence. These include: consultancy services (e.g., concerning the issues of law and taxes), marketing and advertising services, administrating services (e.g., staff management, drawing of accounts), and other business process maintenance services (e.g., maintenance and security of buildings, oversight of IT infrastructure, etc.).

The Rules specify that outsourcing of bank ancillary services shall be conducted in accordance with the policies approved by the bank itself, which shall cover every aspect of outsourcing relating to both significant services and those that do not have significant influence in establishing an appropriate risk management mechanism for this process. It is required to inform the Bank of Lithuania about the outsourcing of not all but significant only ancillary services; at the same time, a revised list of information to be submitted and the procedure for communicating the results of assessment have been established. In addition, in order to ensure the performance of oversight functions to the same extent as would be in the case where the bank itself performs the functions outsourced, it is required to ensure that the Bank of Lithuania, for supervisory purposes, is provided with the possibilities of receiving all necessary information in relation to the outsourcing of the bank’s ancillary services, being introduced to the audit results of the provider of ancillary services to the bank, and accessing data bases, etc.