The 2018 Credit Union Reform in Lithuania

Some major changes are taking place in the credit union sector of Lithuania. 

From 1 January 2018 onward, every credit union in Lithuania will have to be a member of a central credit union and to participate in its solvency assurance system. This means that each credit union will have a direct interest in the stability of their counterparts. By setting collective goals through central credit unions, the whole sector should become a lot more cooperative, transparent and efficient.

Transparency is the topic of the day, as several independent credit unions became insolvent this year with investigations still under way by the Financial Crime Investigation Service. The wave of insolvencies was in part a result of the 2017 asset quality reviews of all Lithuanian credit unions performed by the Bank of Lithuania through independent auditors. The reviews did reveal a couple of bad apples, but the great majority of credit unions passed it with flying colors and have greater confidence in others who did the same. In essence, these insolvencies are seen as a necessary ‘clean-up’ of the credit union sector.

Another major change taking up the bulk of credit union efforts is sustainable capital. In an effort to ensure higher credit union capital stability, the reform changes the way capital is calculated by introducing the sustainable additional credit union share, which has changed the additional credit union share since 2017. Sustainable credit union shares can be bought out only after ensuring that there will be no impact on the capital stability of the credit union.

Also, the Bank of Lithuania has eased the requirements for getting a specialized bank licence. One credit union has used this option to become a specialized bank.

The Lithuanian Central Credit Union (LCCU) is the first and largest central credit union in Lithuania, uniting the majority of credit unions in Lithuania. With over 140,000 members in 50 credit unions, the LCCU has collectively seen a profit of EUR 1.24 million and a 9.28 percent growth of the loan portfolio in the first six months of 2017.