Prudential ratios and requirements of the activities of credit unions

The Law of the Republic of Lithuania on Credit Unions establishes prudential requirements for credit unions to be obligatorily followed by all credit unions of Lithuania. The size of ratios and their calculation methodologies are set by the Bank of Lithuania. The following prudential requirements have been set:

• Capital adequacy;
• Liquidity
• Maximum open position in foreign currencies requirement;
• Maximum exposure to a single borrower requirement.

Capital adequacy requirement is the ratio between the recalculated capital and risk-weighted assets of a credit union. It cannot be less than 13 per cent.

Liquidity ratio is the ratio of liquid assets and liabilities of a credit union on every demand. It cannot be less than 30 per cent.

Maximum open position in foreign currency requirement is the ratio of the overall open position (excluding euros) and capital of a credit union (not more than 25 per cent), and the ratio of a single currency (excluding euros) open position and capital of a credit union (not more than 15 per cent of the credit union capital.

Maximum exposure to a single borrower requirement means that the amount of loans granted to a single borrower cannot exceed 25 per cent of the capital of a credit union. The maximum loan to a single borrower requirement must be followed from 1 January 2010 by credit unions the recalculated capital of which exceeds LTL 2 million.