About the Insurance Company

In December 1995 operation of the Lithuanian Equity Innovation Bank and the Litimpeks bank was suspended. At the time these were among the largest and most popular banks operational in the country. A major part of the Lithuanian population kept their savings here. Therefore, after the suspension of their operation people were greatly concerned and started doubting operation of other Lithuanian banks and safety of the deposits held there. First, the public mistrusted banking activities, then they went into panic. This encouraged immediate development of the mechanism for deposit safety. Such a step became a necessity in order to regain people’s trust in banks. Shortly afterwards – on December 21 of the same year- the Seimas of the Republic of Lithuania passed the Law on the Insurance of Deposits of Individuals No. I-1152 setting forth the mandatory procedure of insurance of individuals’ deposits kept in Lithuanian banks and the rates for compensation of those deposits from the moneys of the Deposit Insurance Fund. Under the document passed, on June 26, 1996, the Government of the Republic of Lithuania set up the state company Deposit Insurance Fund, formed its council and approved the bylaws. The Ministry of Finance of the Republic of Lithuania became the founder of the Fund. The state transferred 30 million litas of budgetary funds to form the authorised capital of the Fund.

On December 16, 1996, the state company Deposit Insurance Fund was registered with the Ministry of Economy of the Republic of Lithuania. This date is considered to be the founding date of this Fund.

March 1, 1997, saw the start of insurance of deposits of individuals.

On July 8, 1997, bankruptcy action was brought against AB Tauro Bankas. (More)

On September 13, 1999, bankruptcy action was brought against the Litimpeks bank (More).

On February 27, 2001, to harmonise elements of the Lithuanian deposit insurance with the requirements of the European Union, the Law on Deposit Insurance of the Republic of Lithuania No. IX-192 was passed, expanding the subject of deposit insurance – from then on not only deposits of individuals, but also deposits of companies could be insured. In addition, the types of the insurers were supplemented by credit unions. On June 20, 2002, the Law on Deposit Insurance and Insurance of Liabilities to Investors of the Republic of Lithuania No. IX-975 was passed. This law broadened the subject of insurance even more, to include insurance of liabilities to investors.

On August ,2002, the name of the state company Deposit Insurance Fund was changed into the state company Deposit and Investment Insurance (hereinafter the Insurance Company).

Functions of the Insurance Company

1) to accumulate money in the Deposit Insurance Fund and Insurance of Liabilities to Investors Fund according to the procedure established by the law;

2) to calculate and compensate insurance compensations to depositors and investors of the insurer;

3) to evaluate deposit insurance or insurance of liabilities to investors (compensation), or other conditions for ensuring safety, of foreign states, banks or companies of which establish departments (branches) in the Republic of Lithuania;

4) to inspect whether insurers do not violate the procedure established by the Law;

5) to evaluate the risk of the Insurance Company;

6) to perform other functions provided for in the Law and bylaws of the Insurance Company.

Rights of the Insurance Company

1) to hold accounts in the Bank of Lithuania, commercial banks and branches of foreign banks;

2) to enter into agreements, to assume liabilities;

3) to dispose of administered assets, according to the procedure established by the law and the bylaws;

4) to terminate deposit insurance and insurance of liabilities to investors in cases provided for in this Law;

5) to check whether insurance compensations of the insurer are calculated and paid correctly;

6) to receive information from an insurer required for the performance of functions;

7) to receive the following information from supervisory institutions of the insurer: on impact measures applied to the insurer; on the right to accept deposits issued and revoked to commercial banks, credit unions, branches of foreign banks; on rights awarded to commercial banks, financial brokerage companies, credit unions and branches of foreign banks;

8) to take loans for fulfilling liabilities of the Insurance Company ;

9) to receive part of the assets of a commercial bank, financial brokerage company or credit union under liquidation, in which depositors’ deposits or liabilities to investors were insured according to this Law;

10) to make asset valuation agreements with persons holding a right to perform valuation of securities;

11) to engage in other activities provided for in the bylaws of the Insurance Company.

12) the Insurance Company performs full administration of the Deposit Insurance Fund and the Insurance of Liabilities to Investors Fund.

Separation of the Deposit Insurance Fund and Insurance of Liabilities to Investors Fund

1. Insurance premiums of commercial banks, branches of foreign banks and credit unions, insurance compensations and income from investment of the Deposit Insurance Fund, as well as funds recovered from the insurer under liquidation that have been paying insurance premiums to the Deposit Insurance Fund are accounted and accumulated separately from the insurance premiums of financial brokerage companies, insurance compensations and income from investment of Insurance of Liabilities to Investors Fund, as well as funds recovered from the insurer under liquidation that have been paying insurance premiums to the Insurance of Liabilities to Investors Fund.

2. Insurance compensations for deposits and liabilities to investors of commercial banks and branches of foreign banks are paid from the Deposit Insurance Fund, while for liabilities to investors of financial brokerage companies – from the Insurance of Liabilities to Investors Fund.

3. In the event of money shortage for payments of insurance compensations in one of the funds, while the other has it, insurance compensations may be paid from the fund where funds are available. Afterwards insurance premiums paid to the fund that was short of money for payments of insurance compensations, are first used to refund the other fund.

Management of the Insurance Company

Management bodies of the Insurance Company include the Council and Administration.

The Council is comprised of 6 members, appointed by the Government of the Republic of Lithuania. The Ministry of Finance proposes 3 candidates, the Bank of Lithuania – 2 candidates, the Securities Commission – 1 candidate. Upon the consent of the Council the sittings may be attended, with a right of advisory vote, by one representative of associations of banks, financial brokers and credit unions. The work of the Council members is paid for by delegating institutions.

The office term of Council members is 4 years, with the number of office term being unlimited. The institution that proposed the candidacy of a Council member may call him off and propose to appoint another candidate instead of him. Only citizens of the Republic of Lithuania permanently residing in the Republic of Lithuania may be Council members. Activity of the Council is headed by the Council chairman, and in his absence – by the deputy Council chairman. The Council chairman and the deputy Council chairman are elected by the Council of the Insurance Company from among its members.

The work of the Council is headed by the Council chairman– (to be corrected).

The Administration is headed by the Director of the Insurance Company Raimundas Žilinskas.

Core Business of the Insurance Company

The Insurance Company insures depositors’ deposits, liabilities to investors, administers the Deposit Insurance Fund, the Insurance of Liabilities to Investors Fund and carries out other activities provided for in the bylaws of the Insurance Company.

Every month the Insurance Company receives reports on the balance of insured deposits from banks and credit unions, that were in the bank or the credit union on each day of the accounting month. Financial brokerage companies submit data required for calculating the insurance premium to the Insurance Company once a year.

Based on them the Insurance Company calculates the insurance premium that an insurer must pay to the account of the Insurance Company with the Bank of Lithuania. The Insurance Company makes a thorough check up of all the reports. In addition, employees of the Insurance Company regularly inspect how insurers calculate insurance premiums. For this reason it explains the technology of report generation, inspects daily balances of an insurer, balances of client accounts, etc.

Insurance premiums are accumulated in the account of the Insurance Company and are invested into governmental securities.

If a bankruptcy action is brought against the insurer, the Insurance Company pays insurance compensations to depositors and (or) investors. An investor acquires a right to insurance compensation as of the day of insured event only if the insurer has assigned the investor’s securities and (or) money or used them without the investor’s will.