In attempt to strengthen safety of deposits with credit unions, the Bank of Lithuania decided to apply a new liquidity requirement – a liquidity coverage ratio – to credit unions, the Bank of Lithuania said in a statement.

Unions will be subject to this requirement from the beginning of next year, informs LETA.

“The aim of this ratio is to ensure that credit unions always hold a certain amount of high-quality liquid assets which could be converted to cash immediately should an unfavourable situation occur. This would allow credit unions to satisfy additional demand for cash for a period of one month without attracting any additional cash flows and avoiding a necessity to sell other assets at a loss,” Vytautas Valvonis, Director of the Supervision Service of the Bank of Lithuania, explained.

According to him, the majority of credit unions do not have liquidity problems, however, the new safeguard would help avoiding problems should they occur in the future because of a buoyant development of credit unions and liquidity risk related thereto.

“The liquidity coverage ratio requirement will oblige credit unions to more precisely forecast cash flows and will act as a safety cushion which would protect in case of financial problems. We will demand that the new requirement is observed on a daily basis,” said Vytautas Valvonis.

According to the data of July 1, 2012, all credit unions would comply with the liquidity coverage ratio but some of them with only a little reserve.

A similar – liquidity buffer – requirement was begun to be applied to banks already in 2010.

In March of this year, the Board of the Bank of Lithuania approved The Provisions for the Enhancement Directions of the Supervision of Credit Union Activities. When implementing them, the supervision of credit unions is strengthened, capital and other requirements are tightened, and the qualification level required from top management of credit unions has been raised up.

Currently, the Central Credit Union of Lithuania and 77 credit unions are operating in Lithuania. They unite about 141,000 of members.