In specific cases, the Bank of Lithuania grants loans to credit institutions for financial collateral.
Such operations are required for payment system participants to cover a temporary shortage of funds in their settlement accounts. Credit operations would also be used during the application of other liquidity-providing measures, which are called open market operations.
The Bank of Lithuania performs credit operations in litas and euro, which differ in their maturity and the legal method of providing financial collateral. Credit operations in litas may have various maturities: intraday or overnight, when the funds are lent to the participants of the payment system LITAS-RLS, or other maturity, when liquidity-providing open market operations are performed. Such operations are performed by concluding repurchase agreements, i.e. the legal method used for providing collateral is the financial collateral agreement with the transfer of ownership rights. Meanwhile, credit operations in euro may take only several hours and borrowed funds must be returned during the same business day. This service is only available for the participants of payments system TARGET2-LIETUVOS BANKAS. In such credit operations, the assets of a credit institution are pledged according to the financial collateral agreement without the transfer of ownership rights. Both legal methods of financial collateral provision are widely used in the European Union.
Eligible assets for financial collateral may be debt securities selected according to reliability criteria set by the Board of the Bank of Lithuania. Eligible assets are evaluated each business day and published on the website of the Bank of Lithuania.