December 21, 2017 / 10:20 AM / a year ago

Lithuania raises banks' capital requirement from end-2018

VILNIUS, Dec 21 (Reuters) - The central bank of euro zone member Lithuania on Thursday announced a countercyclical capital buffer for its banks from end-2018 of 0.5 percent of risk-adjusted private loans, and said it might raise it to at least 1 percent later on.

The additional requirement could help the Lithuanian financial sector, dominated by Swedish-owned banks, to weather possible shocks such as additional trade sanctions against neighbouring Russia or a slump in the Swedish housing market, Lithuanian central bank governor Vitas Vasiliauskas told reporters.

“Bank loans have been growing at a stable rate for the last two years. This is summertime in finance, so it is a good time to begin preparations for wintertime,” he said.

Banks have enough cash at hand to adhere to the new requirement without raising additional funds, and effects on lending would be negligible, he said.

“We will discuss in 2018 whether to raise the requirement to 1 percent,” said Vasiliauskas. “Unless we spot a bubble forming — then we might raise it to 2.5 percent.”

The central bank expects the economy to grow 3.6 percent this year and 2.8 percent in 2018. (Reporting By Andrius Sytas; Editing by Daniel Dickson and Kevin Liffey)

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