Chapter 1
General Provisions
Article 1. Objectives of the Law
This Law shall regulate the establishment, activities, reorganization and liquidation of commercial banks. It shall also be applied to state commercial banks if their bylaws, which shall be adopted by the Supreme Council upon submittal thereof by the Bank of Lithuania, do not provide otherwise.
Article 2. Commercial Bank
1. Commercial bank shall be credit institution whose activities are based on the acceptance of deposits or other borrowed funds from legal and natural persons, as well as on the extension of credits and the assumption of risks and responsibility related thereto.
2. Commercial banks shall be legal persons having their own name and seal and shall function in accordance with this Law, other laws of the Republic of Lithuania, and their own bylaws.
Article 3. Names and Seals of Commercial Banks
1. The name of a commercial bank shall include the words "bank" or "commercial bank". Only credit institutions that are permitted under this Law to engage in banking operations may use the words "bank", "commercial bank", and other combinations of these words in their name or for advertising purposes.
2. Either the complete or abbreviated name of the commercial bank must be on its
Article 4. Asset Liability and Independence of Commercial Banks
1. Commercial banks shall be liable for their obligations to the extent of all their available assets. They shall not be liable for the obligations of their founders and shareholders, although the shareholders and founders shall be liable for the obligations of the bank to the extent of total shares acquired (subscribed).
2. Commercial banks shall not be held liable for the obligations of the state, and the state shall not he held liable for the obligations of commercial banks, with the exception of cases when the state undertakes this responsibility.
3. Commercial banks shall act independently and in conformity with the economic standards established by the Bank of Lithuania on the basis of the Law on the Bank of Lithuania.
Chapter 2
Activities of Commercial Banks
Article 5. Operations of Commercial Banks
Commercial banks shall have the right:
1) to accept time deposits and demand deposits, as well as deposits to current and other accounts;
2) to render and take credits;
3) to carry out operations with payment documents and securities (cheques, bills of exchange, shares, bonds, etc.);
4) to issue financial pledges, guarantees, and other security obligations;
5) to receive customers' valuables for safe-keeping and to rent safe deposit boxes of the bank vaults to customers for the safe-keeping of valuables and documents;
6) to render services and consultations on issues of banking activities, finances, and other issues;
7) with permission of the Bank of Lithuania, to carry out operations in foreign currency, and to buy and sell precious metals; and
8) to conduct other operations consistent with the activities of credit institutions.
Article 6. Contracts between Commercial Banks and their Customers
1 Relations between commercial banks and their customers shall be based on contracts
2. In contracts, the following must be specified:
1) the names of the parties to the contract;
2) the obligations of the parties;
3) the terms for the fulfillment of obligations;
4) the place where obligations shall be fulfilled;
5) interest and commission rates;
6) liability of the parties for breach of contract;
7) conditions for contract termination; and
8) loans obtained by the customer in other banks.
3. The contract may include other provisions that do not contradict the existing legislation.
Article 7. Ensuring Credit Repayment
1. Banks shall have the right to demand that credits issued to customers be secured against material assets. Credits may be secured against collaterals, guarantees, pledges, and other obligations. Banks shall have the right to issue unsecured credits (blank credits).
2. During the credit period, banks may demand that customers (credit recipients) submit information and documents necessary to assess their economic and financial situation.
3. In the event that credit cannot be repaid in time, the bank shall have the right to unilaterally terminate the contract either in full or in part, or to require additional credit guarantees. The further extension of credit by a bank to a legal or natural person engaged in economic activities may be connected with the requirement that the customer provide, over an established period of time, a plan to improve their economic performance that would be acceptable to the bank.
4. In the event of a breach of contract by the customer (credit recipient), the bank shall have the right to demand repayment of credit, either in part or in full, prior to the established schedule for debt repayment.
Article 8. Credit Security
1. As security for credits, commercial banks may accept pledges of goods and other material assets not used as collaterals in other banks, bills of exchange, securities, trade documents, currency and other valuables. Banks shall only issue credits against goods and other material assets located abroad provided that they are properly insured according to an appropriate procedure by an insurance company.
2. Loans against gold cannot exceed 90% of their market price, loans against silver and government securities cannot exceed 80% of their market price, and loans against other securities and physical assets cannot exceed 70% of their market price.
3. Commercial banks may discount bills of exchange and other trade bills for no longer than 12 months.
4. Buildings, structures, equipment and other property considered as fixed assets can be used as collateral only when the customer is liable for his obligations to the full extent of his property. This property must be insured.
5. When the value of collateral falls so that it is no longer sufficient to repay the debt, the bank shall have the right to require additional guarantees from the borrower or, prior to the expiration of the repayment term, to demand repayment of the corresponding portion of the debt.
6. Borrowers who conceal, sell or destroy collateralized property given to them for their use or protection shall be deemed liable under the laws of Lithuania.
7. Banks may not purchase collateral. They also may not accept their own shares as security for debt or guarantee.
8. When debtors fail to repay their debts on time, the collateral pledged to the bank shall be sold at the instruction of the bank without reference to court or arbitration.
9. The debtor shall be notified of the date of sale of collateralized movable property in writing no later than ten days prior to the date of sale.
10. The bank shall deduct from a part of the proceeds from the sale of pledged property corresponding to the sum of debt as stated in the contract, as well as interest and expenses related to the sale of pledged property; the balance remaining shall be returned to the debtor.
11. Provided that the sale of property at the exchange or auction yields a smaller sum than the amount due to the bank, the remaining part of the sum may be recovered from the debtor in the procedure established by law.
12. Banks shall have the right of priority to use the debtor's money which is being kept in their bank in order to discharge outstanding debt. Banks shall notify debtors of such actions in writing no later than 10 days prior to the satisfaction of its claim with the debtor's funds deposited at the bank.
Article 9. Declaration of Debtors as Insolvent
1. Banks may declare debtors who fail to repay loans as insolvent in the press.
2. Banks shall notify the main creditors, founders, as well as the agency that registered the debtor's entity, of the declaration of the debtor as insolvent.
Article 10. Sanctions Against Insolvent Debtors
In regard to insolvent debtors, banks may:
1) refuse to issue new loans;
2) claim loans prior to the agreed term; and
3) use all of the customer's income to recover outstanding debts.
Chapter 3
Establishment of Commercial Banks
Article 11. Ways of Establishing Commercial Banks
Commercial bank may be established:
1) in an open manner:
when founders obtain a part of shares, and a public subscription for shares
is announced;
2) in a closed manner:
when founders obtain a part of shares and distribute them among other individuals
without announcing a public subscription for shares; when shares are obtained
only by the founders.
Article 12. Founders and Shareholders
l. Founders of a commercial bank, with the exception of foreign banks and banks with joint participation of local and foreign founders, shall be the legal and natural persons of the Republic of Lithuania who have signed an agreement on the establishment of a commercial bank in the notary-certified form. This agreement shall define their rights and duties in establishing a commercial bank, as well as liability for failure to perform obligations. When a commercial bank is established in the closed manner, the founders may withhold from signing an establishment agreement and define their rights and obligations in the bylaws of the commercial bank instead.
2. The minimum number of founders of a commercial bank shall be 10 people who are either citizens of the Republic of Lithuania or legal persons registered in the Republic of Lithuania. Each founder of a commercial bank must also be a shareholder of that bank.
3. When a commercial bank is established with the joint participation of local and foreign founders, the minimum number of founders shall be two, and at least one of the founders from each country must be a banking institution. Permission to establish foreign banks, branch offices of foreign banks, and joint banks with foreign founders shall be issued by the Bank of Lithuania.
4. Observing this law, the founders shall draft and sign the bylaws of the commercial bank and shall submit them for registration with the Bank of Lithuania. When a commercial bank is established by a public subscription for shares, the founders, having registered the bank bylaws, shall have the right to circulate the shares in public in the procedure established by law.
5. Shareholder of a commercial bank shall be legal or natural person that has acquired at least one share of the commercial bank in the procedure established by law.
6. Shareholder who has directly or indirectly acquired 1/10 of the fixed capital of the bank or 1/ 10 of voting stock shall become owners of the block of shares.
7. The rights and duties of founders and shareholders shall be established by the bylaws of the commercial bank.
8. The Bank of Lithuania must be given advance notification of the acquisition of the block of shares and its increase (reduction) of up to 20%, 33% or 50% of the fixed capital of the bank for which purpose its permission is required.
Criteria to obtain this permission are: a good financial state, faultless performance in the past, and a good reputation in economic and financial activities.
9. The Bank of Lithuania shall have the right to suspend and revoke the voting rights of a holder of a block of shares if the latter has acquired the block of shares without the permission of the Bank of Lithuania.
10. If the Bank of Lithuania suspends the voting rights of the holder of the block of shares, this block of shares cannot be included in the list of voting stock which is to be submitted at the general meeting of shareholders.
11. At the end of the annual report meeting, commercial banks must submit to the Bank of Lithuania information concerning their shareholders who have obtained 1/10 or more of the bank's capital and the value of the capital obtained.
Article 13. Shares
l. The types, classes, and requisites of shares of a commercial bank, as well as the conditions and procedure of issuing, and subscription and circulation thereof, shall be as established by the Law on Joint Stock Companies of the Republic of Lithuania, if the Law on Commercial (Joint Stock) Banks does not provide otherwise.
2. Banks founded as private joint stock companies may not issue any shares to their shareholders. If no shares are issued, the stock book and accounting documents of the bank shall specify the sum of the fixed capital owned by each shareholder.
3. A commercial bank is prohibited from buying its own shares.
Article 14. Bylaws of a Commercial Bank
1. The bylaws of a commercial bank shall be the legal documents governing the activities of the bank.
2. The bylaws shall state:
1) the name of the bank;
2) the address of the bank headquarters and the addresses of its subsidiaries;
3) the bank's operations;
4) the procedure for conveyancing of registered shares to the ownership of other
5) the amount of fixed and other capital of the bank, as well as the procedure for their formation and utilization;
6) the number of shares, their par value, and the rights they give to the owner;
7) the procedure for payment for shares;
8) the powers of the general meeting, the procedure for when and how to call a general meeting, as well as for voting;
9) the procedure for the election, composition, functions, powers and responsibilities of the board, council, and auditing committee (auditor);
10) the procedure for the distribution of profit;
11) reimbursement of founding expenses, remuneration for founding activities, and privileges granted; and
12) the procedure for the liquidation of a commercial bank.
3. The bylaws may include other provisions, provided they do not contradict the laws of the Republic of Lithuania.
4. The rules for the reimbursement of founding expenses, remuneration for founding activities, and granting privileges can only be amended or repealed when the founding expenses have been fully reimbursed, the founding remuneration has been paid, and privileges have been granted. Disputes of founders, shareholders and third parties with a commercial bank concerning the reimbursement of founding expenses, remuneration for founding activities, and privileges shall be settled in court.
Article 15.
1. The bylaws of a commercial bank shall be registered with the Bank of Lithuania upon submitting the respective application, the notary-certified founding agreement, and the consent of the governing bodies of founders who are legal persons to invest capital in the commercial bank.
2. The founding contract must state:
1) the headquarters of all the bank's founders and their locations;
2) the amount of shares acquired by every founder according to their class; and
3) the term over which the shares must be paid in full.
3. Decisions on the bylaws and amendments thereof must be made, and applicants must be notified, within one month of the submissions of documents listed in the first paragraph of this Article.
4. If the bylaws fail to be registered, the founders, upon elimination of causes obstructing registration, shall have the right to submit them for registration once again.
5. Commercial banks must submit all amendments and changes together with the text of the amended bylaws for registration to the Bank of Lithuania no later than 10 days from the date of the introduction of amendments. Changes and amendments to the bylaws shall come into effect from the date of their registration with the Bank of Lithuania.
Article 16. Report on the Establishment of Commercial Banks
1. Founders of commercial hanks must draft a report on the establishment of the bank and must submit it to the founding meeting of shareholders together with the conclusions of an auditor. When a commercial bank is established as a private joint stock company, the founding report shall not be drafted.
2. The founding report shall specify:
1) founding expenses;
2) non-monetary (property) contributions and their evaluation; activities; and
3) privileges granted, founding expenses reimbursed, and remuneration for founding
4) transactions whose obligations are transferred by founders and other persons to the commercial bank.
3. If only a part of shares has been subscribed for during the period of share subscription, the authorized capital of the bank may be reduced to an established minimum. If only a part of shares has been subscribed for during the period of subscription for shares and the authorized capital has not been reduced, the commercial bank shall not be registered. In such cases, all individuals who have subscribed for shares shall have their contributions returned in full within a period of 15 days. All founders as a body are liable for the repayment of the initial contributions.
Article 17. The Founding Meeting
1. Founders of a commercial bank shall convene a founding meeting of shareholders within 60 days of subscription for the last share. If such meeting fails to be convened within the given period, all subscribers for shares shall be relieved of their obligations and shall have the right to require that their contributions for shares be returned. If a commercial bank is established in the closed manner when shares are purchased only by founders, the founding meeting;, of shareholders must be organized only in cases provided by the Law on Joint Stock Companies or by the founding agreement.
2. All founders or their proxies must take part in the founding meeting of shareholders.
3. The founding meeting of shareholders shall have the right to adopt resolutions if the attending shareholders have more than half of the total number of votes. If the meeting does not have a quorum, another meeting shall be convened within a period of 15 days. The second meeting shall have the right to adopt resolutions regardless of the number of shareholders participating.
4. The founding meeting of shareholders may:
1) increase the fixed capital if the number of shares subscribed for is larger than provided for in the bylaws;
2) reduce the fixed capital in cases provided for in paragraph 3 of Article 16 of this Law; and
3) grant incentives to founders.
5. The founding meeting shall adopt or specify the bylaws of the commercial bank drafted by founders and registered with the Bank of Lithuania, shall adopt the founding report and founders' transactions, shall elect the board and council and the auditing service (auditor), and shall decide other issues within the powers of a general meeting.
Article 18. Issue of Permits (Licences) for Commercial Banking Activities
1. Commercial banks shall become legal persons and shall obtain the right to execute banking operations from the date of the issue of permit (licence) for commercial banking activities and the registration thereof in the registration book of the Bank of Lithuania.
2. Commercial banks must obtain their permit (licence) from the Bank of Lithuania within six months of the date of their registration. If during this period a bank fails to obtain a permit (licence) for its activities, it shall then be deemed not established and contributions of individuals thereto must be repaid in full within 15 days of the registration deadline. If a bank is established without a public subscription for shares, a permit for activities of a commercial bank can be issued together with the registration of its bylaws.
3. A permit (licence) to engage in commercial banking activities shall be issued upon the submission to the Bank of Lithuania of:
1) protocol of the shareholders' founding meeting, or, when the bank is established by purchase of shares by founders only, an application of the founders for the issue of a permit (licence) for commercial banking activities,
2) documents of the founding of the bank: a notary-certified form of the founding agreement of the commercial bank, the bylaws of the bank, and protocol of the shareholders' founding meeting on the adoption of bank bylaws and on the election of the board, the council and the audit service (auditor). When a bank is established by purchase of shares by founders only, the protocol shall be signed by all founders on the election of the managing bodies;
3) documents certifying that all shares have been subscribed and fully paid for, or, if shares have not been issued, that the fixed capital of the bank has been collected from founders (shareholders);
4) documents certifying that the board can dispose of finances received for shares;
5) the full names of the members of the board and the council, the audit committee (auditor), and the chief accountant, as well as information on the educational qualifications, work history, and prior places and positions of employment of the members of the board and the chief accountant. A commercial bank must supply information to the Bank of Lithuania on new persons elected (appointed) to these positions and other changes in the managing bodies of the bank no later than ten days from their coming into force;
6) description of facilities used by the bank with emphasis on the fact that they must be adapted for the safeguard of accumulated funds and customer services;
7) if the main office of the bank is expected to be located in a rented premises, the rent contract with the owner of the building;
8) if the bank has failed to set up cash desk facilities within the first six months of its activities, a letter of guarantee from another bank that the latter will temporarily perform cash services for the customers of the new bank;
9) economic bases of bank activities; and
10) bylaws of the founders of the bank and their financial statements for the past three years approved by an audit organization.
4. Founders of foreign banks and banks with foreign participation shall also submit:
1) the founder -- which shall be a foreign bank, the declared balance of their activities approved in the procedure as established abroad; other legal persons, a document certifying to their legal status; natural persons, recommendations of no less than two solvent legal or natural persons.
2) permission of a controlling body of the founder's country to establish a bank in Lithuania.
5. Permits (licences) for commercial bank activities shall not be issued when:
1) the procedure for the establishment of a commercial bank has been violated;
2) even one of the terms established in paragraph 3 of this Article concerning the issue of permits (licences) to commercial banks have failed to be implemented;
3) the founding agreement or its bylaws contradict the legislation of the Republic of Lithuania, or the financial condition of founders or shareholders who have obtained 1/10 of the fixed capital is deemed unstable; or
4) the founders of the bank are a group of related entities with a common property, common directors, mutual guarantees, and direct commercial dependence.
6. The Bank of Lithuania may refuse to issue a permit (licence) for the activities of a commercial bank if it concludes that the chairperson of its board does not have sufficient qualifications and banking experience. The leadership of a commercial bank must have an honest reputation.
7. Refusal to issue a permit (licence) may be appealed in court.
8. In the event that the Bank of Lithuania refuses to issue a permit (licence) for commercial banking activities, its founders or board, having eliminated obstacles for obtaining such a permit (licence), shall have the right to repeat their application for a permit (licence), which shall be considered in the general procedure.
9. Decisions on the issue of permits (licences) shall be adopted within two months of the date that the documents enumerated in this Article are submitted.
10.A fixed fee for the registration and re-registration of a commercial bank as specified in the Law on the Registration of Enterprises of the Republic of Lithuania shall be paid to the Bank of Lithuania.
11. A sum equaling 10 000 USD shall be paid for the registration of foreign banks and banks with foreign partners, and a sum equaling 1000 USD shall be paid for registering changes in their bylaws.
Article 19. Establishment and Registration of Subsidiaries
1. Commercial banks may establish subsidiaries, branch offices, and representations both within and outside of the territory of the Republic of Lithuania.
2. All subsidiaries, branch offices and representations of commercial banks established in the Republic of Lithuania shall be registered with the Bank of Lithuania in the established procedure. Subsidiaries, branch offices and representations of commercial banks may carry out bank operations from the date of their registration with the Bank of Lithuania.
Chapter 4
Capital of Commercial Banks
Article 20. Composition of Capital
1. Commercial banks must have fixed and reserve capital.
2. Commercial banks that accept deposits must form insurance capital or participate in the collective deposit insurance system.
3. Banks can form other capital as well. The procedure for the formation and use thereof shall be established by the bylaws of the bank.
Article 21. Fixed Capital of a Commercial Bank
1. The fixed capital of a bank shall be made up of the funds of the bank's founders and shareholders from the purchase of shares. The minimum amount of fixed capital of a commercial bank shall be established by the Bank of Lithuania. The fixed capital of a commercial bank shall be paid for prior to the founding meeting of the bank.
The minimum capital for foreign banks and banks with foreign partners shall be the equivalent of 5 million ECUs.
2. Fixed capital cannot be formed from budgetary organisation funds, or from borrowed and collateralized funds.
Article 22. Reserve Capital of a Commercial Bank
1. Commercial banks shall form reserve capital to be used to cover potential losses.
2. Reserve capital shall be formed out of annual profit deductions and shall not be less than the minimum rate established by the Bank of Lithuania. Deductions from the bank's profit shall be made until the amount of reserve capital equals the amount of fixed capital.
3. New deductions from the bank's profit shall be made following the use of reserves to compensate for the bank's losses until the amount of the reserve funds again equals the amount of fixed capital.
Chapter 5
Management of a Commercial Bank
Article 23. Managing Bodies
The managing bodies of a commercial bank shall include the general meeting of shareholders, the board, and the council of the bank.
Article 24. The General Meeting of Shareholders
1. The general meeting of shareholders shall be the supreme managing institution of a bank. All of the shareholders of the bank, regardless of the number and class of their shares, shall have the right to attend the general meeting. Members of the board who are not shareholders may also attend the meeting with the right of an advisory vote.
2. The general meeting shall have the right:
1) to adopt and amend the bylaws of the bank;
2) as necessary, to elect and recall before the expiration of their term members of the board, the council and the audit service (auditor), and from them, the chairperson of the board, the chairperson of the council, and the head of the audit service who are subordinated to the board;
3) to approve issues on the founding of bank subsidiaries, branch offices and representations;
4) upon submission by the council, to fix the salary of the members of the council and also to approve salaries of the members of the board and the audit service (auditor) or extend to the board the powers to decide these issues;
5) to approve the annual balance and estimate, and to establish the procedure for the distribution of profit and the remuneration of losses;
6) to approve the increase or reduction of fixed capital;
7) to liquidate or reorganize the commercial bank and to solve issues concerning its merger with another bank; to elect and recall members of the liquidation committee and approve the financial statements of this committee;
8) to consider other issues proposed by the board, the council and the audit service (auditor); and
9) to consider proposals by shareholders and complaints regarding the activities of the board and the council.
3. The procedures of the general meeting of shareholders and the rules of adopting decisions therein shall be established by the Law on Joint Stock Companies of the Republic of Lithuania unless other provisions are made in the bank's bylaws.
Article 25. Commercial Bank Councils
1. The council of a commercial bank shall monitor and control the activities of the board of the bank. The activities, powers and rights of the bank council shall be established by the bylaws of the commercial bank as well as by Article 24 of the Law on Joint Stock Companies of the Republic of Lithuania (with the exception of clauses 1 and 2 of paragraph 1 of this Article).
2. Upon proposal by the board, the bank council shall:
1) define the duties, rights, responsibilities and salaries of the bank's employees;
2) define the guidelines of bank activities;
3) determine the amount and type of credits that can be issued only with the approval of the council;
4) solve issues concerning the establishment of bank subsidiaries, branch offices, agencies and representations;
5) solve issues concerning the purchase and sale of real estate; and
6) define the rules of the formation and utilization of other types of capital.
3. The number of members of the bank council shall be established in the bylaws, although the number must be odd, and must not be smaller than three.
4. The bank council shall be elected from the shareholders for no longer than four years. Members of the bank council may be re-elected for another term.
5. The term of office of the council of a commercial bank shall begin with the adjournment of the general meeting of shareholders that has elected it.
6. Members of the bank council may only be legally capable natural persons possessing shares of a given bank.
7. The following persons cannot be members of the bank council:
1) persons who are members of the supervisory board or bank councils of more than two other enterprises (commercial banks) registered in the Republic of Lithuania;
2) members of the board of that or another commercial bank;
3) persons who have been deprived of the right to perform these duties by law; and
4) members of the Government, the State Controller, members of the board of the Bank of Lithuania, as well as persons who have held the above positions less than a year ago.
8. The bank council and its members shall not have the right to delegate or transfer their functions to other persons or managing institutions.
9. The general meeting of shareholders may only remunerate members of the bank council from the bank's profit.
Article 26. The Bank Board
1. The board of a commercial bank shall direct the bank, manage its activities, represent the bank, and bear liability for the bank's transactions. The number of board members (which, however, must be at least three), the activities, powers, and rights of the board and its members, as well as the procedure for adopting resolutions, shall be defined by the bylaws of the commercial bank.
2. Members of the board and its chairperson shall be elected for a term not exceeding four years by the general meeting of shareholders. Board members may serve an unlimited number of terms.
3. Only legally capable natural person may be elected member of the board. The following persons may not be elected members of the board:
1) council members of the same commercial bank;
2) members of the Government, the State Controller, members of the board of the Bank of Lithuania, as well as persons who held these positions less than a year ago;
3) board members of any other bank registered in the Republic of Lithuania; and
4) persons who have been deprived of this right by law.
4. Members who are spouses, direct relatives or adopted children may not serve on the board simultaneously.
5. The bylaws may establish additional requirements for members of the board.
6. Members of the board may resign from their post at any time by submitting a written application. Resignations shall come into force from the date that the application is filed, unless another date is specified in the application.
7. The members of the board and its chairperson shall work in the bank and receive a fixed salary established by the general meeting of shareholders or the bank council, if the latter has been instructed by the general meeting to decide these issues.
8. Members of the board shall not have the right to delegate their duties to other persons. Board members who are temporarily unable to work shall be replaced by a member of the council, who shall be appointed by the council of the commercial bank. While performing the functions of board member, members of the council shall not simultaneously work at the council.
Article 27. The Audit Service (Auditor) of Commercial Banks
1. Commercial banks shall each have at least one auditor elected by the general meeting of shareholders for a term specified by the bylaws but not exceeding four years. The number of terms shall not be limited. The post of auditor may be held by a legally capable person possessing a diploma which certifies that he or she is properly qualified.
2. The post of auditor may not be held by a member of the council, the board, or its chief accountant.
3. The audit service (auditor) must:
1) inspect the implementation of bank's estimate, the activities of the bank and the bank's adherence to legislation and bank bylaws;
2) inspect the annual balance and other financial books and documents which serve as the basis for the general meeting to adopt resolutions; and
3) report all established violations to the next general meeting of shareholders or sitting of the council;
4. The audit service (auditor) shall have the right to carry out any inspection on the instructions of the general meeting of shareholders, the board or the council.
Article 28. Liability for Losses Incurred by the Bank
Liability for losses incurred by the bank at the fault of activities of members of the council, the board, or bank employees shall be established by the laws of the Republic of Lithuania as well as by the bylaws of the bank.
Chapter 6
Finances and Profit Distribution
Article 29. The Fiscal Year
The fiscal year of commercial banks shall coincide with the calendar year.
Article 30. Profit Distribution
1. The profit of a bank shall consist of the funds which remain after the calculation of bank expenses and losses from the income generated during the fiscal year of the bank.
2. The profit shall be distributed by the general meeting of shareholders within three months of the end of the fiscal year; before that, the annual balance shall be approved. The resolution for the distribution of profit must state:
1) the net profit;
2) taxes;
3) deductions for reserve capital;
4) deductions for other funds of the bank;
5) dividends;
6) annual payments to members of the board and the council; and
7) residual profit.
3. Dividends shall be paid to shareholders from the net profit after taxes and funds for the reserve and other capitals of the bank have been deducted.
Article 31. Accounting, Accountability, and Control of Commercial Banks
1. The accounting, accountability and control of commercial banks shall be regulated by the Law on the Bank of Lithuania and other laws of the Republic of Lithuania.
2. Commercial banks must, in the official press, publish their annual financial statements, balance sheets, and conclusions by independent auditors by the first of May.
Chapter 7
Protection of Customers Interests
Article 32. Confidentiality of Commercial Banks
1. Banks and their employees shall deem confidential all information concerning accounts, deposits of bank customers and correspondents, and operations of the bank. Bank employees shall pledge to maintain confidentiality upon assuming their job.
2. Courts of law, interrogation bodies, financial institutions, and the State Control Department shall be given information on accounts and operations of customers of commercial banks in the procedure established by law.
3. Commercial banks shall submit all documents and information concerning their operations to the Bank of Lithuania upon the latter's request.
4. Information concerning the accounts and deposits of a deceased owner shall be given only to individuals identified in the owner of the account or deposit's will as well, as to notary offices during the discussion of issues of inheritance.
Article 33. Seizure of and Claims for Funds and Valuables Held in Commercial Banks
1. Seizure of funds and valuables of legal persons held in banks may be imposed and canceled only upon the decision of the court and bodies of interrogation and arbitration. These funds or other valuables can be claimed only by the decision of the court or arbitration bodies, and in cases established by the laws of the Republic of Lithuania, as well as by the demand of financial organizations and institutions.
2. Seizure of funds and other valuables of foreign states and international organizations held in banks may be imposed, canceled or claimed only upon a respective decision by the court or arbitration body.
3. Seizure of funds and other valuables of residents may be imposed:
1) by the decision of interrogation bodies or the court, when criminal cases under consideration may produce civil claims to compensate for damages inflicted; and
2) by the decision of the court when considering civil cases on the payment of alimony or the division of joint property of spouses.
4. Funds and other valuables held in a bank can be claimed only upon a respective valid court verdict or decision.
Article 34. Deposits of Residents
The types of deposits of residents and the terms of their keeping shall be determined by the commercial bank.
Article 35. Control of Larger Payments
When opening accounts to their customers and transferring sums exceeding 15,000 ECUs, commercial banks must require proof of identity. The bank's chiefs shall inform respective law enforcement bodies of all possible cases of money laundering.
Chapter 8
Sanctions Against Commercial Banks
Article 36. Types of Sanctions
1. The Bank of Lithuania may apply the following sanctions against commercial banks that have violated this Law, other laws of the Republic of Lithuania, as well as their own bylaws, and have failed to follow the instructions of the Bank of Lithuania on the elimination of violations:
1) the prohibition of carrying out one or several types of transactions;
2) the demand that the general meeting of shareholders suspend the activities or remove the leadership of the commercial bank;
3) the demand that the general meeting of shareholders appoint an administrator to the commercial bank;
4) the revoker of the permit for activities of the commercial bank.
Chapter 9
Liquidation of Commercial Banks
Article 37. Adoption of Decisions to Liquidate Commercial Banks
1. Commercial banks shall be dissolved when the permit on commercial banking activities has been revoked in the procedure established by law, or when the fixed capital of the bank has become smaller than the minimum established by the Bank of Lithuania and has not been duly replenished.
2. The general meeting of shareholders may decide to dissolve a bank even in the absence of the above conditions.
3. A bank shall be liquidated by the decision of the general meeting of shareholders; when such decision is not adopted, it shall be liquidated upon the order of the Bank of Lithuania.
4. Such decisions shall be adopted within one month of the emergence of the cause to liquidate the bank.
5. The decision to liquidate a bank or the order of the Bank of Lithuania thereon shall be published in the press.
Article 38. Bank Liquidation Committees
1. Having resolved to dissolve a bank or having received the respective order from the Bank of Lithuania, the general meeting of shareholders shall elect a liquidation committee. The board of the bank shall terminate its activities as soon as such a committee is elected.
2. The liquidation committee shall complete the current matters of the bank, shall represent the bank in court and arbitration bodies, shall make and receive payments on behalf of the bank, and shall sell the property of the bank.
3. The liquidation committee may sell the bank's real property only with the consent of the general meeting of shareholders.
4. During the liquidation of a commercial bank, priority shall be given to settlements with bank depositors and other creditors.
5. The remaining funds shall be divided among the shareholders in proportion to their shares of stock.
6. Activities of the liquidation committee shall be supervised by the council of the bank.
7. Upon completion of its work, the liquidation committee shall submit for approval to the general meeting of shareholders the liquidation account approved by the council of the bank.
8. The liquidation committee shall submit to the Bank of Lithuania the approved bank liquidation account and the annual balance sheet of the bank under liquidation for the current year. The liquidation committee shall also publish the balance sheet and the liquidation account in the press.
Article 39. Merger of Banks under Liquidation with Other Banks
If the general meeting of shareholders of a commercial bank under liquidation addresses the Bank of Lithuania with a request to permit its merger with another bank or to set up a new commercial bank by way of merging two or more banks, this request shall be considered in the procedure established in Article 16 of the Law on the Bank of Lithuania.
Vytautas Landsbergis
President
Supreme Council
Republic of Lithuania
Vilnius
2 July, 1992
No. I-2715