Republic of Lithuania Law Amending Articles 10, 47, 48, 53, 56, 57, 58, 60, 67, 68, 71, Annex and Supplementing with Articles 601, 602 of the Law on the Central Credit Union No VIII-1682 2


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Translated by the Ministry of Finance
 
 
 
 
REPUBLIC OF LITHUANIA
LAW AMENDING ARTICLES 10, 47, 48, 53, 56, 57, 58, 60, 67, 68, 71, ANNEX AND SUPPLEMENTING with ARTICLES  601, 602  OF THE LAW ON the CENTRAL CREDIT UNION NO VIII-1682 2
 
24 November 2015 - No XII-2056
Vilnius
 
 
 
 
Article 1. Amendment to Article 2
 
Amend paragraph 12 of Article 2 to read as follows:
 
12. Other concepts used in this Law shall be interpreted as they are defined in the Law on Financial Institutions, the Law on Financial Sustainability of the Republic of Lithuania and Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1) (hereinafter - Regulation (EU) No 575/2013).
 
 
 
Article 2. Amendment to Article 10
 
Amend paragraph 5 of Article 10 to read as follows:
 
5. Upon the withdrawal of a licence, the Central Credit Union shall not have the right to provide financial services, except to the extent it is necessary to settle with the Central Credit Union’s creditors, or meeting the obligations under the provisions of Article 47 of the Law on Financial Stability, and a decision must be taken on the liquidation of the Central Credit Union or opening of bankruptcy proceedings against it according to the procedure set forth in Chapters Ten and Eleven of this Law.
 
 
 
Article 3. Amendment to Article 47
 
Amend subparagraph 1 of paragraph 4 of Article 47 to read as follows:
 
1) not later than ten days prior to the ordinary general meeting, provide access for the members of the Central Credit Union and the supervisory authority to the set of annual financial statements checked by an audit firm, a draft decision on the appropriation of profit and the auditor’s report.
 
 
 
Article 4. Amendment to Article 48
 
Amend paragraph 2 of Article 48 to read as follows:
 
2. A general meeting of the Central Credit Union shall select an audit firm to perform audit of sets of annual financial statements of the current year and not more than two subsequent financial years.
 
 
 
Article 5.  Amendment to Article 53
 
Amend Article 53 to read as follows:
 
Article 53. Duties and Rights of the Supervisory Institution
 
1. In addition to other duties and rights laid down in this Law and other legal acts, the supervisory authority shall have the right:
 
1) to issue to the Central Credit Union the mandatory instructions specified in paragraphs 2 and 3 of this Article, and the Central Credit Union must implement them within the time limit laid down by the supervisory authority and forthwith give a written notice thereof to the supervisory authority;
 
2) where the decisions taken by bodies of the Central Credit Union pose a threat to the stability and soundness of activities of the Central Credit Union, to apply to court according to the procedure set forth by laws to declare them void on the basis prescribed by the Civil Code;
 
3) to conclude with audit firms, property appraisers or other persons holding appropriate qualifications agreements on the carrying out of an inspection of the Central Credit Union in order to determine the value of the Central Credit Union’s assets, financial position of the Central Credit Union, to assess the risks taken or inspect other areas of the Central Credit Union’s activities. The persons acting in accordance with the agreements concluded with the supervisory authority and referred to in this subparagraph shall have the rights referred to in Article 55(2) and (3) of this Law. Where upon completion of the inspection it is established that the Central Credit Union has supplied incorrect information to the supervisory authority or where other violations of legal acts are established, the expenses in connection with organisation of the inspection as incurred by the supervisory authority shall be covered by the Central Credit Union;
 
4) to demand to change an audit firm auditing the Central Credit Union’s sets of financial statements where it or the auditor does not meet (comply with) the requirements set forth by laws;
 
5) to demand in accordance with Article 541 of this Law to provide information necessary for the performance of supervisory function and carry out investigations necessary for the performance of supervisory function, as well as conduct inspections (verifications) in accordance with Article 55 of this Law;
 
6) to appoint a permanent representative of the supervisory authority for the supervision of activities of the Central Credit Union. The permanent representative of the supervisory authority shall mutatis mutandis have the rights provided for in Article 55 of this Law.
 
2. The supervisory authority upon discovering violations of legal acts or shortcomings in the activities of the Central Credit Union, or where activities of the Central Credit Union pose a threat to the stability and soundness of activities of the Central Credit Union, or having data that legal acts may be violated within the period of the coming 12 months, shall have the right to issue to the Central Credit Union the following mandatory instructions:
 
1) to eliminate the violations of the legal acts or operational shortcomings of the Central Credit Union within the time limit laid down by the supervisory authority;
 
2) to have capital that would exceed the capital ratios provided for in this Law and Regulation 575/2013 (EC) and (or) form appropriate capital buffers;
 
3) to improve the internal control and (or) risk management processes;
 
4) to make proper assessment of the reduction of loans' value and to form additional special provisions, or to improve the procedure for assets' management;
 
5) not to carry out certain activities, not to conclude certain transactions or to reduce the scope of such activities or transactions, including transactions on the purchase of ancillary services of the Central Credit Union, acquisition of holdings in other legal persons’ authorised capital and (or) voting rights or real estate, or to reduce investments in the activities that cause excessive risk to the reliability of the Central Credit Union;
 
6) to reduce the risks related to the activities of the Central Credit Union, products and systems;
 
7) to limit a variable component of remuneration paid to the heads and staff of the Central Credit Union when it is inconsistent with the maintenance of a sound capital base;
 
8) to use the net profit to strengthen the Central Credit Union's own capital;
 
9) to limit or terminate the payment of dividends to the shareholders of the Central Credit Union or the payment of interest to the holders of non-equity securities issued by the Central Credit Union that  are included into the capital of the Central Credit Union where such limitation does not mean default on obligations of the Central Credit Union;
 
10) to provide to the supervisory authority additional information or provide information on a more frequent basis that is necessary for the performance of the supervisory function;
 
11) to meet special requirements for liquidity;
 
12) to publicly disclose additional information;
 
13) to perform an audit of the set of interim financial statements of the Central Credit Union within the time limit laid down by the supervisory authority;
 
14) to prepare and implement, within the time limit laid down by the supervisory authority, an acceptable action plan for the restructuring of activities of the Central Credit Union and (or) the elimination of discovered violations and (or) shortcomings;
 
15) to convene the general meeting of the Central Credit Union or a meeting of the supervisory board or the board, and to discuss thereat the issues proposed by the supervisory authority. Where the bodies of the Central Credit Union does not fulfil the requirement to convene a general meeting, the supervisory authority shall have a right to convene a general meeting, to prepare its agenda and to require to consider the issues proposed by the supervisory authority therein;
 
16) for the heads of the Central Credit Union to appear before the supervisory authority and provide clarifications. The supervisory authority shall have the right to publicly announce its instruction for the heads of the Central Credit Union to appear before the supervisory authority;
 
17) to meet additional prudential requirements for activities of the Central Credit Union or carry out other actions or not to carry out certain actions in order to bring violations of legal acts to an end or to eliminate shortcomings in activities of the Central Credit Union, or to ensure the stability and soundness of activities of the Central Credit Union.
 
3. The Supervisory authority having determined that the Central Credit Union has violated the requirements of Articles 3, 4, 5, 6, 7, 14, 15, 16, 17, 24, 25 and 26 of this Law, Regulation (EU) No 575/2013, Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments amending Regulation (EU) No 648/2012 (OJ 2014 L 173, p. 84), or with knowledge that the financial brokerage firm will violate them due to the rapidly deteriorating financial condition, shall have the right to issue to the Central Credit the instructions provided in subparagraphs 14 and 15 of paragraph 2 of this Article Union and the following binding instructions:
 
1) to implement one or more of the procedures and measures set out in the recovery plan drawn up in accordance with the provisions of Articles 4-11 of the Law on Financial Stability, or update a recovery plan, where the circumstances which prompted the application of the instructions set out in this paragraph differ from the assumptions set out in the current recovery plan, and to implement one or more of the procedures and measures set out in the updated recovery plan within the time limit set by the supervisory authorities ensuring that the circumstances which prompted the application of the measures set out in this paragraph are removed;
 
2) to remove or replace one or more members of the supervisory board of the Central Credit Union, members of the board of the Central Credit Union, heads of administration or persons of the Central Credit Union belonging to the senior management of the Central Credit Union provided it is determined that the person (s) does not meet the requirements set out in Article 22 of the Law;
 
3) to draw up a plan of negotiations on debt restructuring with some or all of its creditors in accordance with the recovery plan;
 
4) to change the business strategy of the Central Credit Union;
 
5) to change the legal, organizational and operational structure of the Central Credit Union.
 
4. The supervisory authority having determined that the Central Credit Union meets the conditions referred to in paragraph 3 of this Article, shall immediately notify the resolution authority for  financial sector entities (hereinafter - the resolution authority). In this case (including cases where the supervisory authority carries out inspections in accordance with Article 55 of this Law), the supervisory authority shall have the right to obtain all information necessary to update the restructuring plan drawn up in accordance with the Law on Financial Sustainability to prepare for the possible restructuring of the Central Credit Union and to evaluate its assets and liabilities. The supervisory authority must provide the following information to the restructuring authority.
 
5. The instructions referred to in paragraph 2 of this Article may also be given by simultaneously imposing sanctions. The instructions referred to in paragraph 3 of this Article may also be given along with the requirements set out in paragraph 2 of this Article and (or) by imposing sanctions.
 
6. In accordance with paragraph 2 of this Article, when imposing adequate capital requirement for the Central Credit Union or adequate capital reserve requirements, as well as special liquidity requirements, the supervisory authority shall take into consideration the quantitative and qualitative criteria for supervisory review and evaluation, evaluation of systemic risk, management structure of the Central Credit Union, processes of risk identification, management, and internal control.  
 
7. The employees of the supervisory authority shall have the right according to the procedure set forth by the supervisory authority to participate in the work of bodies of the Central Credit Union and committees of the Central Credit Union – to attend meetings or sittings in the capacity of observers or otherwise observe activities of the bodies of the Central Credit Union, the committees of the Central Credit Union and heads of the Central Credit Union.
 
8. The supervisory authority according to the procedure set forth by it and in compliance with the legal acts regulating the protection of personal data shall have the right to store and otherwise process data on debtors of the Central Credit Union. The Central Credit Union must provide to the supervisory authority data on its debtors and shall have the right to use these data according to the procedure set forth by legal acts of the supervisory authority.
 
9. The supervisory authority shall exercise the rights provided for in this law:
 
1) directly;
 
2) in collaboration with other supervisory authorities;
 
3) with the assistance of other persons to carry out certain actions;
 
4) with the assistance of law enforcement institutions.
 
10. The supervisory authority in deciding the issuance of the binding instructions pursuant to paragraph 3 of this Article shall also follow the applicable European Union legislation.
 
 
 
Article 6. Amendment to Article 56
 
Amend paragraph 1 of Article 56 to read as follows:
 
1. The supervisory authority shall notify the European Banking Authority of the licences issued according to the procedure set forth by this Law, by indicating in which deposit insurance system the Central Credit Union, which has obtained a license, participates, the sanctions imposed and complains lodged regarding those sanctions, as well as their proceedings, the European Commission and the European Banking Authority – of the licences withdrawn and provide them and the supervisory authorities of the Member States of the European Union with other information. The cases of and procedure for providing notifications and information shall be set forth by legal acts of the supervisory authority.
 
Article 7. Amendment to Article 57
 
1. Amend subparagraph 4 of paragraph 1 of Article 57 to read as follows:
 
4) to suspend from office a member (members) of the Central Credit Union’s supervisory board, a member (members) of the board, the head (heads) of the Central Credit Union’s administration, one or more persons belonging to the senior management of the Central Credit Union, or to remove from office a member (members) of the Central Credit Union’s supervisory board, a member (members) of the Central Credit Union’s board, the head (heads) of the Central Credit Union’s administration, one or more persons belonging to the senior management of the Central Credit Union, and to require to remove them from office and (or) terminate a contract concluded therewith or divest them of their powers.
 
2. Supplement the Law with subparagraph 10 of paragraph 1 of Article 57:
 
10) to appoint a temporary administrator of the Central Credit Union.
 
3. Supplement the Law with subparagraph 11 of paragraph 1 of Article 57:
 
11) to announce a restriction (moratorium) on activities of the Central Credit Union.
 
 
 
Article 8. Amendment to Article 58
 
Amend paragraph 5 of Article 58 to read as follows:
 
5. The supervisory authority shall adopt a decision on imposition of a sanction which, according to the Law on Insurance of Deposits and Liabilities to Investors, is considered to be an insured event, not later than within five working days from the day when it establishes that the Central Credit Union holding a licence issued by the supervisory authority is unable to settle a reasonable claim to return a deposit and there are grounds for believing that it will not be able to settle it soon.
 
 
 
Article 9. Amendment to Article 60
 
Amend Article 60 to read as follows:
 
Article 60. Removal from Office of a Member (Members) of the Central Credit Union’s Supervisory Board, a Member (Members) of the Central Credit Union’s Board, the Head (Heads) of the Central Credit Union’s Administration
 
1. As of the day of the delivery to the Central Credit Union of a decision by the supervisory authority to temporarily remove from office a member (members) of the Central Credit Union’s supervisory board, a member (members) of the Central Credit Union’s board,  the head (heads) of the Central Credit Union’s administration, or one or more persons belonging to the senior management of the Central Credit Union, a person removed from office shall not have the right to exercise his functions and all decisions taken by him after entering into force of the said decision shall be void.
 
2. Where the supervisory authority takes a decision to remove from office of a member (members) of the Central Credit Union’s supervisory board, a member (members) of the Central Credit Union's board, the head (heads) of the Central Credit Union’s administration, or one or more persons belonging to the senior management of the Central Credit Union, and to require to remove them from office and (or) terminate a contract concluded therewith or divest them of their powers, a body of the Central Credit Union which has such a right must, within the time limit laid down in the decision of the supervisory authority, remove the person from office and (or) terminate the contract concluded therewith or divest him of his powers.
 
3. The decision to remove from office a member (members) of the Central Credit Union’s supervisory board, a member (members) of the Central Credit Union's board, the head (heads) of the Central Credit Union’s administration or one or more persons belonging to the senior management of the Central Credit Union shall be communicated to the Central Credit Union, the Register of Legal Entities and published on the website of the supervisory authority.
 
 
 
Article 10. Supplementing the Law with Article 601
 
Supplement the Law with Article 601:
 
Article 601. Temporary Administrator of the Central Credit Union
 
Provisions of Article 751 of the Law of Banks of the Republic of Lithuania shall apply mutatis mutandis to the appointment of a temporary administrator of the Central Credit Union.
 
 
 
Article 11. Supplementing the Law with Article 602
 
Supplement the Law with Article 602:
 
Article 602. Restriction (Moratorium) on Activities of the Central Credit Union
 
Provisions of Article 76 of the Law of Banks of the Republic of Lithuania shall apply mutatis mutandis to a restriction (moratorium) on activities of the Central Credit Union.
 
 
 
Article 12. Amendment to Article 67
 
Amend Article 67 to read as follows:
 
Article 67. Legal Regulation of the Central Credit Union’s Bankruptcy Procedure
 
Bankruptcy procedures of the Central Credit Union shall be regulated by the Law on Enterprise Bankruptcy, except where this Law, the Law on Financial Sustainability and the Law on Financial Institutions provide otherwise.
 
 
 
Article 13. Amendment to Article 68
 
Amend Article 68 to read as follows:
 
Article 68. Conditions for the Recognition of the Central Credit Union as Insolvent
 
1. The Central Credit Union may be recognised as insolvent provided under at least one of the following conditions:
 
1) the Central Credit Union violates the requirements due to the fact that the Central Credit Union has suffered or, it is likely, will suffer losses for compensation of which it will need all or a large part of its own funds, or for other reasons related to its financial situation, or, based on objective factors supporting this assessment, will violate in the near future the requirements for the granting of a license and provide the basis for the supervisory authority to revoke the license thereof; 
 
2) the assets of the Central Credit Union is, or based on objective factors, it is established that in the near future it will be less than its liabilities;
 
3) the Central Credit Union is unable or, based on objective factors supporting this assessment, it is established that in the near future it will not be able to pay its debts in due time or meet other obligations.
 
2. The Central Credit Union’s bankruptcy proceedings shall be opened by the court only at the initiative of the resolution authority where other persons specified by law applies to the court and the conditions laid down in Article 102 of the Law on Financial Sustainability are fulfilled. Where the resolution authority fails according to the procedure laid down in Article 102 of the Law on Financial Sustainability to provide the court with the information about its intention to take a restructuring action, the court shall decide on the initiation of bankruptcy proceedings against the Central Credit Union only where there is a conclusion of the supervisory authority on the insolvency of the the Central Credit Union.
 
 
 
Article 14. Amendment to Article 71
 
Amend Article 71 to read as follows:
 
Article 71. Order of Satisfaction of Creditors’ Claims
 
1. The claims of employees related to employment relationship, the claims to compensate for damage done due to mutilation or other bodily injury, contraction of an occupational disease or death as a result of an accident at work shall be satisfied first.
 
2. The claims of the state undertaking Deposit and Investment Insurance on the expenses related to the payment of insurance benefits to the depositors or investors of the Central Credit Union referred in the Law on Insurance of Deposits and Liabilities to Investors and (or) the Law on Financial Sustainability shall be satisfied second.
 
3. The claims related to the payment of taxes and making other payments to the budget and benefits of compulsory state social insurance and compulsory health insurance as well as to the granted loans received on behalf of the State and with the guarantee of the State shall be satisfied third.
 
4. The claims of natural persons and very small, small and medium-sized enterprises as they are defined in the Law on Small and Medium Sized Business Development, for a part of the deposit in excess of the insured amount provided for in Article 4 of the Law on Insurance of Deposits and Liabilities to Investors, and of natural persons and very small, small and medium-sized enterprises on deposits, which can be regarded as deposits meeting the requirements if they were kept in the Central Credit Union, shall be satisfied fourth.
 
5. Other claims of the Central Credit Union’s creditors, with the exception of the claims referred to in paragraphs 1, 2, 3, 5, 6 and 7 of this Article, shall be satisfied fifth.
 
6. The claims of creditors related to subordinated loans granted to the Central Credit Union and non-equity securities issued by the Central Credit Union, which have all characteristics of a subordinated loan, excluding claims specified in paragraph 7 of this Article, shall be satisfied sixth.
 
7. The claims of creditors related to non-equity securities issued by the Central Credit Union which have all characteristics of a subordinated loan and whose acquisition transactions provide that claims in respect of them shall be satisfied only after the claims of other Central Credit Union creditors, including claims over subordinated loans granted to the Central Credit Union and other non-equity securities issued by the Central Credit Union which have all characteristics of a subordinated loan, shall be satisfied seventh.
 
8. The claims of the Central Credit Union’s supervisory board, the board and the heads of the administration of the Central Credit Union shall be satisfied eight.
 
 
 
Article 15. Amendment of the Annex to the Law
 
Amend the Annex to the Law to read as follows:
 
Annex to the
 
Law on the Central Credit Union of the
 
Republic of Lithuania
 
 
 
 
 
LEGAL ACTS OF THE EUROPEAN UNION IMPLEMENTED BY THIS LAW
 
 
 
1. Directive 86/635/EEC of the Council of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (OJ, 2004 Special Edition, chapter 6, volume 1, p 157) with the latest amendments done by Directive 2003/51/EC of the European Parliament and of the Council of 23 June 2003 (OJ, 2004 Special Edition, chapter 17, volume 1, p 273).
 
2. Directive 2013/36/EC of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p.338).
 
3. Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ 2014 L 173, p. 149).
 
4. Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (OJ 2014 L 173, p. 190).
 
 
 
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
 
 
 
 
 
 
 
PRESIDENT OF THE REPUBLIC                                                           DALIA GRYBAUSKAITĖ

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