“This fintech sector continues to show rapid growth, and the Bank of Lithuania aims to make this process sustainable. Having assessed the financial statements for last year submitted by electronic money institutions and payment institutions, we have drawn the attention of their management to the most frequent cases or errors,” says Vaidas Cibas, Director of the Financial Services and Markets Supervision Department of the Bank of Lithuania.
At the end of the first half of 2023, there were 127 institutions (83 EMIs and 44 PIs) operating in the EMI and PI sector. Compared to the same period last year (for comparability, data of one significant former participant was eliminated), the sector’s income from licensed activities went up by almost a quarter to €227 million, while the amount of payment transactions reduced by 5.8% to €97 billion. However, about 70% of the sector’s turnover (€67.3 billion) was generated by ten EMIs and PIs, and the rest (30.4% or €29.4 billion) by 77 EMIs and PIs.
Ten EMIs and PIs accounted for 68%, i.e. nearly €154 million, of the sector’s operating income from licenced activities.
At the end of the first half of the year, three institutions failed to comply with the own funds requirement. Having assessed the submitted unaudited financial statements, the Bank of Lithuania addressed the heads of EMIs and PIs by sending a Dear CEO Letter, providing recommendations on monitoring the own funds indicators and on control measures ensuring that the own funds do not fall below the required minimum. The letter also sets out recommendations on the separation of business and compliance functions, risk management and cases where certain functions are delegated to third parties.
In addition, the Bank of Lithuania has started to publish, in Lithuanian and English, a depersonalised analysis of specific cases of deficiencies, irregularities and good practices identified during inspections and analyses.
To address the issues of relevance to EMIs and PIs, in the first half of 2023, the Bank of Lithuania organised 3 consultation events (attended by around 350 participants), 55 meetings with financial market participants, and sent out 63 practice improvement notices. Two more training events (on the assessment of higher customer risk and the implementation of international sanctions) were organised jointly with the Center of Excellence in Anti-Money Laundering, where representatives of the central bank participated as lecturers. These training events attracted nearly 2,500 attendees.
Furthermore, the Bank of Lithuania participates in quarterly meetings with representatives of fintech associations and their members and advises financial market participants on various compliance and anti-money laundering issues relevant to them.
In the period under review, the Bank of Lithuania carried out 4 inspections of EMIs and PIs, 2 assessment visits, imposed 27 sanctions, issued 2 new and revoked 5 EMI or PI licences (2 licences were revoked at the request of the institutions themselves and 3 licences were revoked for significant breaches of legal acts).
The Bank of Lithuania continues to monitor compliance with the guidelines on the right of EMIs and PIs to use bank accounts opened with credit institutions. In the first half of 2023, 5 notifications pertaining to closed or restricted accounts for EMIs and PIs were received from credit institutions. The Bank of Lithuania has received 60 such notifications in total since 2019.
The latest information for market participants is published under frequently asked questions and recommendations. The Bank of Lithuania also publishes information on annual and quarterly key performance and prudential indicators of each EMI and PI.
