The Bank of Lithuania (Lithuanian: Lietuvos Bankas) is the central bank of the Republic of Lithuania. The Bank of Lithuania is a non-Eurozone member of the European System of Central Banks. The chairman of the bank is Vitas Vasiliauskas.

The role of the Bank of Lithuania is very important for the country’s economy and financial system, therefore the Bank of Lithuania is included among the most important state institutions in the Constitution of the Republic of Lithuania.

Mission
Mission of the Cank of Lithuania is ensuring the sustainability and integrity of the state’s monetary, credit and payment systems and their stable, reliable and efficient functioning, thus creating favorable conditions for the optimal development of the national economy.

Objectives
The Bank of Lithuania is the central bank of the Republic of Lithuania. Its principal objective is to maintain price stability. In seeking its principal objective, the Bank of Lithuania is independent from the Government of the Republic of Lithuania or other institutions of the state.

The role of the Bank of Lithuania is very important for the country’s economy and financial system, therefore the Bank of Lithuania is included among the most important state institutions in the Constitution of the Republic of Lithuania.

The Bank of Lithuania is the central bank of the Republic of Lithuania. Its principal objective is to maintain price stability. In seeking its principal objective, the Bank of Lithuania is independent from the Government of the Republic of Lithuania or other institutions of the state.

The majority of non-cash settlements (both in litas and in euro) are made via the central bank’s payment systems. A significant number of people use services of commercial banks and credit unions, whereas the Bank of Lithuania performs supervision of these credit institutions by issuing licences for their operation, monitoring their financial situation and operational risks, taking measures for these risks to be at an acceptable level and preparing and publishing the banking sector reviews.

The Bank of Lithuania formulates and implements monetary policy, determines the litas exchange rate regulation system and sets the official exchange rate of the litas. Earlier the litas was pegged to the US dollar at the fixed exchange rate, whereas now it is pegged to the euro. The Bank of Lithuania has already maintained the stable exchange rate of the litas against the anchor currency for more than 15 years.

Foreign reserves managed and used by the Bank of Lithuania represent a significant financial tool for ensuring the stability of the litas. By investing these reserves, the Bank of Lithuania earns the largest share of its income.

The bank of Lithuania monitors and analyses the country’s economy, forecasts its potential developments and performs the financial system stability assessment. This is important for enterprises in the planning and expansion of their activities, and for the population in taking borrowing and investment decisions.

History
The Bank of Lithuania, established in March 1990, has continued the traditions of the central bank operating in the period between two world wars. From 1990 to 1992, when Lithuania was still in the rouble zone, the Bank of Lithuania was not able to pursue an active monetary policy, and its main efforts were aimed at preparing for the introduction of the national currency. In 1992 the temporary currency, the talonas, was introduced, which allowed the Bank of Lithuania to perform the functions of an independent central bank. The litas was introduced in 1993, triple-digit inflation was curbed and the exchange rate of the litas was stabilised.

Seeking relative price stability over a longer period, the Litas Credibility Law of 1994 pegged the litas to the US dollar at fixed exchange rate; pursuant to this Law, the litas is issued into circulation with a 100 per cent backing with gold and convertible currency reserves, and the main source of issue is the purchases of foreign exchange by the Bank of Lithuania. The international reserves, initially consisting of the inter-war Bank of Lithuania gold and foreign exchange that were returned by other central banks, were continuously supplemented with foreign exchange reserves accumulated by the Bank of Lithuania and invested following the international practices of central banks.

The sector of commercial banking, having gone through the first demanding trials in 1995, has become stable and continued to expand, building on the adopted decisions towards strengthening the capital base, tightening of prudential requirements and supervision and the introduction of the established international standards of safe banking. An inter bank funds transfer and settlement system has been developed and is now used by all commercial banks and foreign bank branches operating in Lithuania.

The new Law on the Bank of Lithuania adopted in 2001 granted greater independence to the central bank and wider possibilities to be active in implementing monetary policy. With Lithuania’s continuing integration in the Western structures, development of economic relations with the European Union Member States and corresponding changes in trade currency structure, on 2 February 2002 the litas was pegged to the euro, while the fixed exchange rate regime was retained.

On Lithuania's accession to the European Union (EU) on 1 May 2004 the Bank of Lithuania became a member of the European System of Central Banks (ESCB), which comprises the European Central Bank (ECB) and the national central banks of all EU Member States.

Functions
In implementing the primary objective, the Bank of Lithuania performs the following functions:

• issuing the currency of the Republic of Lithuania;
• formulating and implementing monetary policy;
• determining the litas exchange rate regulation system and announcing the official exchange rate of the litas;
• managing, using and disposing of foreign reserves of the Bank of Lithuania;
• acting as a State Treasury agent;
• issuing and revoking licenses of credit institutions of the Republic of Lithuania and permissions for the establishment and operation of branches and representative offices of credit institutions of foreign states, supervising their activities and establishing the principles and procedures for financial accounting and reporting;
• developing and managing an inter-bank funds transfer system and establishing the requirements for the participants of the inter-bank funds transfer system;
• collecting monetary, banking and balance of payments statistics, as well as data on Lithuanian financial and related statistics, implementing standards on the collection, reporting and dissemination of such statistics and compiling the balance of payments of the Republic of Lithuania;
• establish principles and procedures for financial accounting and reporting of credit institutions of the Republic of Lithuania and branches of credit institutions of foreign states operating in the Republic of Lithuania;
• encourage stable and efficient operation of payment and securities settlement systems.

Management and structure
The Bank of Lithuania is governed by the Board of the bank consisting of a Chairperson, two Deputy Chairpersons and two Members. The ongoing operations of the Bank of Lithuania are managed by four services, six departments and five autonomous divisions. The headquaters of the Bank of Lithuania are situated in Vilnius. Services: Supervision Service – monitors compliance of financial institutions with the standards of safe and reliable activities established by laws and other legal acts as well as international standards. The Service also investigates disputes between consumers and supervised institutions and provides recommendations on how, according to the Bank of Lithuania, a particular dispute between a consumer and a financial institution should be settled. Economics and Financial Stability Service – performs monitoring and forecasting of economic processes as well as financial stability analysis and policy, encourages sound and efficient functioning of the financial market infrastructure; collects, validates, compiles, publishes and provides statistical information.

Banking Service – management of foreign reserves and other financial assets, investment of funds of the Bank of Lithuania depositors, payments and settlements of depositors, credit institutions and of the Bank of Lithuania.

Cash Service - formulate the country’s cash administration policy and responsible for its implementation, perform the accounting of the country’s cash reserves, store and control them, organize their supplementation with banknotes and coins of good aesthetic appearance and sufficiently well protected against counterfeiting, regulate the quality of cash in circulation investigate acceptability of currency and its genuineness.

Departments and Autonomous Divisions:

• Accounting Department – performs accounting and prepares financial statements;
• Information Technologies Department - develops and installs information systems, hardware, software and network equipment and ensures security and reliable operation of information systems;
• International Relations Department – responsible for the participation of the Bank of Lithuania in the European System of Central Banks and the activities of the European Union institutions and its cooperation with international financial organisations;
• General Services Department – responsible for the creation of optimal working conditions for the Bank’s employees and ensures proper technical condition and operation of fixed tangible assets;
• Security Department – ensures the overall security of the Bank of Lithuania property, valuables, staff and information;
• General Division – responsible for all the office work and the administration of general matters at the Bank;
• Legal Division – responsible for assistance in performing and implementing the functions and rights of the Bank of Lithuania through legal measures;
• Organisation and Personnel Division – responsible for the implementation of the Bank’s personnel and organisation management policy and the coordination of strategic operational planning within the Bank;
• Communications Department – responsible for the provision of information to the public and the media about the activities of the Bank of Lithuania;
• Risk Management Division – coordinates the risk management process within the Bank of Lithuania;
• Internal Audit Division – audits all the activities of the Bank and provides recommendations on operational improvements and the efficiency of the internal control system.

Accounting and Transparency
In implementing its functions, the Bank of Lithuania applies transparency standards formed by the global central banking practice. Various communication channels are used for keeping the general public informed about the Bank’s activities. Efficient communication not only helps to increase confidence in this important financial institution of the State, but also provides the public with necessary knowledge on banking and macroeconomics. This, in turn, determines constantly increasing reliability of the country's economic and financial sectors operation.

The Bank of Lithuania regularly prepares and publishes its Annual Report. It contains information on key monetary policy tasks and their implementation, monetary policy operations, supervision of credit institutions and activities undertaken in performing other functions established by the laws, as well as on the country’s macroeconomic situation.

Lithuanian and foreign media are regularly informed about the national banking and financial systems. Board resolutions, information on payments, financial stability reviews, macroeconomic forecasts, information on operations of credit institutions operating in Lithuania, participation of the Bank in the European System of Central Banks, international relations, etc., are available on the website of the Bank of Lithuania in Lithuanian and English.

The publications of the Bank provide information on its activities, present monetary and banking, balance of payments and financial statistics and introduce litas banknotes and coins. The publications are distributed free of charge inside the country and abroad, whereas their electronic versions are available on the Bank’s website. The Bank of Lithuania issued a number of books on money and banking history and on the representation of money in graphic arts, photographs, small-format graphics and cartoons.

International Relations
The Bank of Lithuania co-operates with the international financial institutions such as the International Monetary Fund, the World Bank group, the Bank for International Settlements, the European Bank for Reconstruction and Development and others, and participates in the activities of these institutions.

The co-operation with foreign central banks is based on bilateral and multilateral initiatives, with the purpose of sharing experience in the key areas of central banking. The Bank of Lithuania has signed co-operation agreements with Baltic, Nordic and other foreign countries central banks.

The Bank of Lithuania provides technical assistance for the central banks of countries, included in the Policy provisions of the Development Cooperation of the Republic of Lithuania. The seminars are organized in the arrears of credit institutions supervision, statistics, information technologies, internal audit, risk management, accountant and other issues of interest for the specialists of the central banks of Belarus, Ukraine, Georgia, Armenia, Azerbaijan, Kyrgyz Republic.

Useful links

Currency of Lithuania:

Lithuanian litas

List of Central Banks:

Central Banks

Official website of Bank of Lithuania:

www.lb.lt

Law on the Bank of Lithuania:

www3.lrs.lt

Ministry of Finance of the Republic of Lithuania:

www.finmin.lt