On 27 March 2008, the Insurance Supervisory Commission of the Republic of Lithuania decided to amend the list of imperative rules of law protecting the public order, obligatory to branches of insurance companies of other member states established in the Republic of Lithuania, and insurance companies of member states providing services in the Republic of Lithuania, by supplementing Section XII. Other Legal Acts with resolution No. N-23 of 4 March 2008 of the Insurance Supervisory Commission of the Republic of Lithuania, “On Approval of Statistical Report on Insurance Activity in the Republic of Lithuania” (official gazette Valstybės Žinios, 2008, No. 29-1054).

      

      Contact persons:

      Vilius Bernatonis, partner (vilius.bernatonis@spp.lt);

      

      Rokas Bukauskas, associate (rokas.bukauskas@spp.lt);

      On 6 March 2008, the Rules for Managing the Loan Risk Database had been amended by resolution No. 25 of the Board of the Bank of Lithuania “On Amendment of Resolution No. 125 of 21 December 1995 “On Approval of the Rules for Managing the Loan Risk Database” (hereinafter the Rules) (official gazette Valstybės Žinios, 2008, No. 31-1113). The amended rules will come into effect on 30 June 2008.

      The Rules had been amended taking into account the expansion of the activities of banks, the growing need for providing additional information to/from the Loan Risk Data Base, as well as wishes expressed by banks to stop requesting certain data as it does not have crucial importance for establishing the borrower’s possibilities to fulfil its obligations to the bank.

      It was established that only the data of the borrowers’ annual financial statements must be provided to the Loan Risk Database. Before that, information about the managers having controlling interest, or five key shareholders, was obligatory to be provided to the Loan Risk Database. This requirement was abandoned considering that such information was not significant for establishing whether the borrower would be able to fulfil its obligations to the bank in time.

      It is provided for in the amended Rules that the banks having submitted a shortened enquiry of the first type about the borrower will be able to receive a brief reply.

      In order to implement the provisions of Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, in the national laws and regulations, the Government of the Republic of Lithuania had prepared a draft law on amendment to the Law on Audit of the Republic of Lithuania.

      In order to harmonise all related laws and regulations, draft laws amending the Law on Financial Institutions (official gazette Valstybės Žinios, 2002, No. 91-3891), Accounting Law (official gazette Valstybės Žinios, 2001, No. 99-3515), Law on Banks (official gazette Valstybės Žinios, 2004, No. 54-1832), the Code of Administrative Offences of the Republic of Lithuania, had been prepared.

      It is provided for in the draft amendment to the Law on Financial Institutions of the Republic of Lithuania, that the auditor or another person participating in the audit together with the auditor, may not perform an audit of the same financial institution for more than 5 consecutive financial years. The current version of the Law on Financial Institutions allows the same persons to perform the audit of the same financial institution for not more than 3 consecutive financial years.

      The Law on Banks of the Republic of Lithuania is proposed to be amended by establishing that the auditor as well as another person participating in the audit together with the auditor, may not perform an audit of the same bank for more than 3 consecutive financial years. The current version of the Law on Banks allows the same persons to perform the audit of the same bank for not more than 2 consecutive financial years.

      Following adoption of the proposed amendments to the laws by the Seimas of the Republic of Lithuania, the said amendments would come into effect on 1 June 2008.

      On 4 March 2008, the Insurance Supervisory Commission of the Republic of Lithuania adopted resolution No. N-23 “On Approval of Statistical Report on Insurance Activity in the Republic of Lithuania” (hereinafter the Resolution) (official gazette Valstybės Žinios, 2008, No. 29-1054), whereby the form of statistical report on insurance activity in the Republic of Lithuania as well as description of procedure for filling out of and amendment to statistical report, had been approved. The Resolution came into effect on 9 March 2008.

      Following the effective date of the Resolution, the conditions for activity of all participants in the Lithuanian insurance market, related to information disclosure to the public, had been uniformed, i.e. the statistical data on insurance market in the same format would be received every month both from the insurance companies registered in Lithuania, and from branches of insurance companies of other member states, established in the Republic of Lithuania.

      Following the end of each month the report should be submitted to the Insurance Supervisory Commission by the 15th day of the next month, except for March, June, September and December. Following the end of each quarter the report should be submitted to the Insurance Supervisory Commission by the 20th day of the first month of the next quarter.

      The Supreme Court of Lithuania (hereinafter the SCL) had examined the civil case following the cassation appeal of creditor – limited liability company Hansabankas regarding reversal of the judgement of 28 June 2007 of the panel of judges of the Division of Civil Cases of Panevėžys County Court in the civil case regarding rejection of application to register the pledge bond (case No. 3K-3-100/2008).

      The representative of the creditor had submitted an application to register a pledge bond whereby the borrower had pledged all current and future funds in the bank account of the pledgor to secure its obligations to the creditor. The judge of the Mortgage Division of Panevėžys City District Court had set the deadline for eliminating of flaws in the application: the amount of funds in the pledged accounts was not indicated; the value of the collateral was set at LTL 1. This did not secure properly the obligation of LTL 200,000. The panel of judges discussed whether the judge of the Mortgage Division had not breached the legal rules governing the actions of the judge of mortgage division upon registration of pledged transaction (Art. 4.210, 4.221 of the Civil Code; Art. 46.6 of the Regulations of the Mortgage Register).

      The SCL had stated that the amount of pledged funds in the bank account might, as well as not, be equal to the amount of the main obligation, however, it might not be so small as to contradict the security function of the right to pledge, i.e. it was clear already at the moment of transaction that the size of the collateral would make it impossible to secure another obligation. The criterion of amount used to define the current and future pledged funds, maintains the balance between the rights and obligations of the creditor and the borrower or the pledgor.

      The panel of judges had stated that such a situation where following the pledge of monetary funds in a bank account the creditor is the bank itself, and the bank manages the account of the client pursuant to the agreement between the bank and the client, does not mean that the bank has the right to manage all the funds under the agreement when the value of the collateral is set at LTL 1 upon pledge of the monetary funds in the bank account. Under the pledged transaction only certain amount specified in the pledged transaction is pledged and not the entire bank account.

      The panel of judged of the SCL determined that the judge of the Mortgage Division had properly carried out actions related to application for registering of the pledge of current and future funds in the pledgor’s account, and had reasonably refused to grant such application because the collateral was not defined according to the requirements established in the law.