Approval of Supervision Rules for Branches of Foreign Banks Licensed in Non-EU Member States

BOARD OF THE BANK OF LITHUANIA

DECISION

ON THE APPROVAL OF THE SUPERVISION RULES FOR BRANCHES OF FOREIGN BANKS, LICENSED IN NON-EUROPEAN UNION MEMBER STATES

June 18, 2026 No. 2026/03-72

Vilnius

Guided by Article 42(4)(1) of the Law on the Bank of Lithuania of the Republic of Lithuania, Article 77(5) and Article 77(6)(4) of the Law on Banks of the Republic of Lithuania, and implementing Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, with the last amendments made by Directive (EU) 2024/1619 of the European Parliament and of the Council of 31 May 2024, the Board of the Bank of Lithuania d e c i d e s:

1. Approve the Supervision Rules for Branches of Foreign Banks Licensed in Non-EU Member States (attached).

2. Declare invalid the Decision No. 85 of the Board of the Bank of Lithuania of May 20, 2004 “On the Approval of Rules for the Supervision of Foreign Bank Branches and Cooperation with Supervisory Authorities of Other Member States of the European Union in Performing Branch Supervision” with all amendments and additions.

3. Establish that this decision enters into force on January 11, 2027.

Chairman of the Board

Gediminas Šimkus

APPROVED

by the

Board of the Bank of Lithuania

Decision No. 2026/03-72

of June 18, 2026

SUPERVISION RULES FOR BRANCHES OF FOREIGN BANKS, LICENSED IN NON-EUROPEAN UNION MEMBER STATES

CHAPTER I

GENERAL PROVISIONS

1. The Supervision Rules for Branches of Foreign Banks Licensed in Non-EU Member States (hereinafter – the Rules) detail the provisions of the Law on Banks of the Republic of Lithuania regarding branches of foreign banks licensed in non-EU Member States (hereinafter – foreign bank branch), including internal governance, risk management, accounting procedures, requirements for the submission of financial and supervisory reports, criteria for assessing the systemic importance of foreign bank branches, and the procedure for supervisory review and assessment.

2. Foreign bank branches are supervised in accordance with the provisions of the Law on Banks, the Law on Financial Institutions of the Republic of Lithuania, the Law on the Bank of Lithuania of the Republic of Lithuania, and the legal acts of the Bank of Lithuania applicable to the supervision of banks holding a license issued in accordance with the Law on Banks, taking into account contracts concluded with the supervisory authority of the respective foreign state.

3. Foreign bank branches must comply with the risk-limiting norms for banking activities established in the Law on Banks.

4. The terms used in these Rules are understood as defined in the Law on Banks and the Law on Financial Accounting of the Republic of Lithuania.

CHAPTER II

Internal Governance and Risk Management

5. A foreign bank branch must comply with the provisions of the Bank of Lithuania’s legal acts regarding internal governance, risk management, and remuneration, ensure the performance of internal control functions (risk management, compliance assurance, and internal audit), and appoint persons responsible for the effective daily management of the performance of internal control functions.

6. A foreign bank branch must establish a procedure for reporting to the parent company’s management body, covering all significant risks and risk management policies and their amendments, and implement appropriate information and communication technology systems and control measures ensuring proper policy compliance.

7. A foreign bank branch must monitor and manage its agreements for the purchase of services supplementing banking activities (hereinafter outsourcing) and ensure that the Bank of Lithuania has full access to all information necessary for it to perform its supervisory functions.

8. A foreign bank branch conducting compensatory (hereinafter back-to-back) or intra-group transactions must have sufficient resources to identify counterparty credit risk and manage it properly when significant risks associated with assets registered in the foreign bank branch’s accounting books are transferred to the counterparty.

9. When a foreign bank branch’s essential or important functions are performed by its parent company, those functions must be performed in accordance with internal agreements or intra-group agreements. A foreign bank branch must ensure that the Bank of Lithuania has full access to all information necessary for it to perform its supervisory functions.

CHAPTER III

Requirements for Accounting Registers

10. A foreign bank branch must maintain accounting registers that enable it to track and comprehensively and accurately register all assets and liabilities registered or initiated in its accounting registers in the Republic of Lithuania, and to independently manage those assets and liabilities in the foreign bank branch. The accounting registers must provide all necessary and sufficient information about the risks assumed by the foreign bank branch and how they are managed.

11. A foreign bank branch must prepare and regularly review and update the accounting register policy under which the accounting registers specified in Rule 10 are maintained. This policy must be documented and approved by the relevant management body of the parent company. The policy must clearly justify the accounting register decisions and explain how those decisions align with the foreign bank branch’s business strategy.

CHAPTER IV

Criteria for Assessing Systemic Importance

12. When assessing a foreign bank branch’s compliance with the criteria specified in Article 77(6)(1)(2) and (3) of the Law on Banks (whether a foreign bank branch must obtain a license under Article 9 of the Law on Banks to provide financial services in the Republic of Lithuania) and performing the assessment specified in Article 77(7) of the Law on Banks (whether a foreign bank branch is systemically important and poses significant risks to the financial stability of the European Union or the Republic of Lithuania), the Bank of Lithuania takes into account the criteria for assessing the systemic importance of foreign bank branches, which include:

12.1. the size of the foreign bank branch;

12.2. the complexity of the structure, organization, and business model of the foreign bank branch;

12.3. the strength of the foreign bank branch’s interconnections with the financial systems of the European Union and the Republic of Lithuania;

12.4. the substitutability of the activities, services, or operations performed by the foreign bank branch, or the financial infrastructure provided;

12.5. the market share held by the foreign bank branch in the European Union and the Republic of Lithuania, taking into account total banking assets and the activities, services, and operations performed by the branch;

12.6. the likely impact that the suspension or termination of the foreign bank branch’s operations or activities could have on the liquidity of the Republic of Lithuania’s financial system or on payment, clearing, and settlement systems in the European Union and the Republic of Lithuania;

12.7. the role and importance of the foreign bank branch in the activities, services, and operations of the foreign state’s group in the European Union and the Republic of Lithuania;

12.8. the role and importance of the foreign bank branch in carrying out resolution or liquidation, based on information provided by the resolution authority;

12.9. the volume of activities of the foreign state’s group conducted through foreign bank branches, compared to the activities of that group conducted through subsidiaries licensed in the European Union and in the Member States where those foreign bank branches are established.

CHAPTER V

Supervisory and Financial Information Regarding the FOREIGN BANK BRANCH and the Parent Company

13. A foreign bank branch must periodically provide the Bank of Lithuania with information regarding:

13.1. the assets and liabilities registered in its accounting registers specified in Chapter III of these Rules, and the assets and liabilities initiated by the foreign bank branch, categorizing the data so that the following data are distinguished:

13.1.1. the largest registered assets and liabilities, categorized by sectors and counterparty types, including in particular positions in the financial sector;

13.1.2. significant concentration of positions and funding sources with respect to certain types of counterparties;

13.1.3. significant intra-group transactions with the parent company and members of the parent company’s group;

13.2. the foreign bank branch’s compliance with the requirements of the Law on Banks and the Bank of Lithuania’s legal acts applicable to it;

13.3. on an ad hoc basis – deposit insurance available to depositors of the foreign bank branch, in accordance with Article 10 of the Law on Deposit and Investor Obligations Insurance of the Republic of Lithuania;

13.4. other requirements established for the foreign bank branch.

14. When providing information regarding assets and liabilities registered in accounting registers under Rule 13.1, a foreign bank branch must apply international financial reporting standards.

15. A foreign bank branch must provide the Bank of Lithuania with the following information regarding its parent company:

15.1. periodically – aggregated information regarding assets and liabilities managed or registered in accounting registers by the parent company’s subsidiaries and other foreign bank branches in the European Union;

15.2. periodically – information regarding the parent company’s compliance with applicable risk-limiting requirements at individual and consolidated levels;

15.3. on an ad hoc basis – information regarding significant supervisory reviews and assessments when performed regarding the parent company, and decisions made by its supervisory authority related thereto;

15.4. information regarding the parent company’s recovery plans and specific measures that could be taken regarding foreign bank branches under those plans, and all subsequent updates and amendments to those plans;

15.5. the parent company’s business strategy related to foreign bank branches, and all subsequent amendments to that strategy;

15.6. information regarding services provided by the parent company to clients established or located in the European Union at the exclusive initiative of those clients, as specified in Article 16 of the Law on Banks.

16. The Bank of Lithuania has the right to establish additional information reporting requirements for foreign bank branches if necessary to fully assess the business, activities, or financial soundness of foreign bank branches or their parent companies, to verify that foreign bank branches and their parent companies comply with legal acts, and to ensure that foreign bank branches comply with those legal acts.

17. Foreign bank branches of Class 1, specified in Article 77(1) of the Law on Banks, must submit the supervisory and financial information specified in Rules 13–16 semi-annually, and foreign bank branches of Class 2, specified in Article 77(2) of the Law on Banks, must submit it once a year.

18. The Bank of Lithuania may exempt a foreign bank branch meeting the requirements, as understood under Article 77(4) of the Law on Banks, from all or part of the information reporting requirements regarding the parent company established in Rule 15, if the Bank of Lithuania can obtain the relevant information directly from the supervisory authorities of the respective foreign state.

CHAPTER VI

Supervisory Review and Assessment Process

19. The Bank of Lithuania reviews the procedures, strategies, processes, and mechanisms implemented by the foreign bank branch in compliance with the provisions of the Law on Banks and the Bank of Lithuania’s legal acts applicable to it.

20. Based on the review specified in Rule 19, the Bank of Lithuania assesses whether the procedures, strategies, processes, and mechanisms applied by the foreign bank branch, as well as its available capital and liquid assets, ensure reliable management and coverage of its significant risks and the viability of the foreign bank branch.

21. When performing the review and assessment specified in Rules 19 and 20, the Bank of Lithuania applies the principle of proportionality, adhering to the criteria specified in paragraphs 5 and 5(1) of the Description of Requirements for the Supervisory Review and Assessment Process, approved by Decision No. 03-131 of the Board of the Bank of Lithuania of August 13, 2015 “On the Approval of the Description of Requirements for the Supervisory Review and Assessment Process.” In particular, the Bank of Lithuania determines the frequency and intensity of the review specified in Rule 19, which must be proportional taking into account whether the foreign bank branch is classified as Class 1 or Class 2, and which takes into account other important criteria, such as the nature, scale, and complexity of the foreign bank branch’s activities.