Economy and Banking Sector of Lithuania

Location Northern Europe
Population (2016)2 888 558 ↓ (-0.01%)
EU Status member since 2004
Economy
National Currency EUR (Euro) since 1 January 2015
GDP 
    Nominal GDP (2015)37.2 bln EUR ↑ (+0.02%)
    Nominal GDP per Capita (2015)12 800 EUR ↑ (+0.03%)
    Real GDP Growth (2015)1.6 % ↓ (2014: 2.9 %)
Inflation Rate 
    CPI, MoM (Sep 2016)0.8 % ↑ (Aug 2016: -0.4 %)
    CPI, YoY (Sep 2016)0.6 % ↑ (Aug 2016: 0.5 %)
    CPI, Year Average (2015)-0.7 % ↓ (2014: 0.2 %)
Unemployment Rate (2015)9.1 % ↓ (2014: 10.4 %)
Government Bond Yield (Sep 2016)0.79 % ↓ (Aug 2016: 0.86 %)
Credit Ratings (as of Sep 2016)
    FitchA- high credit quality, outlook stable
    Moody'sA3 upper medium grade, outlook stable
    S&PA- upper medium grade
Taxation
Double Taxation Agreements 55 signed agreements
Information Exchange 
    Exchange on Request 1 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 26 August 2014, Model 1
Banking Sector
Financial Market Development 4.1 (max 7.0) rank: 60th out of 138 countries
    Banks' Soundness 4.8 (max 7.0) rank: 71st out of 138 countries
Banking Industry Country Risk 7(1 - lowest risk, 10 - highest risk)
    Economy Risk 7
    Industry Risk 7
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Euro)Aaa prime
    Foreign CurrencyAaa prime
Deposit Rates (Aug 2016, EUR)0.13 % ↑ (Jul 2016: 0.11 %)
Banking Sector Structure 
    Number of Banks89
    Recent Changes (2015) new banks: 2, closed banks: 1
    Consolidated Assets (2015) 23 436.81 mln EUR ↓ (-2.87%)
Major Banks
 AB „Swedbank“  AB DNB bankas
 AB SEB bankas
 List of Banks in Lithuania

Lithuanian Economy

National Currency

Lithuania joined the Euro Area on 1 January 2015. The preceding national currency, Lithuanian litas (LTL), was replaced by Euro.

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GDP

According to Eurostat, nominal GDP of Lithuania in 2015 was 37.2 bln EUR.

Lithuania outperforms the European Union in terms of real GDP growth with the average annual differential coming to 1.6% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 1.6% which was equal to the Euro Area average (1.6%) and below the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Lithuania.
Chart 1. Real GDP Growth in Lithuania. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Lithuania was 12 800 EUR.

Lithuania has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -19.5% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Lithuania; European Union = 100.
Chart 2. GDP Per Capita at Purchasing Power Parity in Lithuania; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Lithuania in 2015 expressed as annual percentages of average consumer prices was -0.7% which was below the Euro Area average (0.0%) and below the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Lithuania.
Chart 3. Inflation Rate in Lithuania. Source: Eurostat, International Monetary Fund.
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Taxation in Lithuania

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Lithuania signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Armenia
 Austria
 Azerbaijan
 Belarus
 Belgium
 Bulgaria
 Canada
 China
 Croatia
 Czech Republic
 Denmark
 Estonia
 Finland
 France
 Georgia
 Germany
 Greece
 Hungary
 Iceland
 India
 Ireland
 Israel
 Italy
 Kazakhstan
 Korea, Republic of
 Kyrgyzstan (Jun 2013)
 Latvia
 Luxembourg
 Macedonia
 Malta
 Mexico
 Moldova, Republic of
 Netherlands
 Norway
 Poland
 Portugal
 Romania
 Russian Federation
 Serbia
 Singapore
 Slovakia
 Slovenia
 Spain
 Sweden
 Switzerland
 Turkey
 Ukraine
 United Kingdom
 United States
 Uzbekistan

There are also several agreements between Lithuania and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Cyprus (Jun 2013)
 Kuwait (Apr 2013)
 Morocco (Apr 2013)
 Turkmenistan (Jun 2013)
 United Arab Emirates (Jun 2013)
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

There are also several agreements between Lithuania and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Guernsey (Jun 2013)

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Lithuania signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Lithuania has FATCA agreement with the U.S. in effect since 26 August 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Lithuania are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Lithuanian financial accounts hold in U.S. financial institutions will be reported to Lithuanian authorities.

Further Information:
FATCA and European countries

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Lithuanian Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Lithuania is scored 4.1 out of maximum 7.0 and ranked 60th out of 138 analysed economies. Soundness of banks is scored 4.8 bringing Lithuania into the 71st place, trustworthiness and confidence of financial market is scored 4.3 (61st place).

Financial Market Development in Lithuania.
Chart 4. Financial Market Development in Lithuania. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Lithuania is included into group '7' with economic risk scored '7' and industry risk scored '7'.

BICRA Group 7
Economic risk 7
    Economic resilience high
     Economic imbalances high
    Credit risk in economy high
Industry risk 7
    Institutional framework high
    Competitive dynamics high
    Systemwide funding very high
Government support assessment supportive

Table 1. BICRA for Lithuania. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Lithuania are summarised in Table 2.

Scheme Participantsall credit institutions operating in Lithuania (including branches of foreign banks), branches of Lithuanian banks abroad
Eligible Depositorsnatural persons, legal entities
Covered Accountsall deposit accounts
Covered Currenciesall
Maximum Protected Amount100 000 EUR
Paid In CurrencyEUR

Table 2. Deposit guarantee scheme in Lithuania.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Euro) deposit ceiling for Lithuania is set to Aaa (prime), foreign currency deposit ceiling is Aaa (prime).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Euro) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.13% which was below the Euro Area average (0.53%).

Deposit Rates in Lithuania.
Chart 5. Deposit Rates in Lithuania. Source: ECB.

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Banking Sector Structure

Currently there are 89 credit institutions operating in Lithuania.

Recent structural changes (2013 - 2015) of the banking sector of Lithuania are summarised in Table 3.

201320142015
Number of Opened Banks112
Number of Closed Banks331

Table 3. Recent structural changes in the banking sector of Lithuania.

All the credit institutions operating in Lithuania can be classified into several categories. Table 4 summarises the number of banks in each category.

CategoryNumber of Banks
Banks6
Branches of foreign banks8
Central banks1
Credit unions74

Table 4. Number of banks by category in Lithuania.

The list of the most recently opened banks in Lithuania is provided in Table 5.

NameStart Date
 Telia Finance AB Lietuvos filialas „Telia Finance Lietuva” (new)October 2015
 Scania Finans Aktiebolag Lietuvos filialas (new)July 2015
 Nordea Bank AB Lietuvos skyrius (new)March 2014
 Kredito unija „Saulėgrąža” (new)August 2013

Table 5. The most recently opened banks in Lithuania.

There are 8 branches of foreign banks from 5 different countries in Lithuania. Table 6 shows the number of branches grouped by the country of origin.

Country of OriginNumber of Branches
 Sweden4
 Estonia1
 Denmark1
 Finland1
 Latvia1

Table 6. Number of branches of foreign banks in Lithuania grouped by country of origin.

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