Second lecture 3X3


On 16 December, Wednesday, the second lecture from the cycle 3X3 was delivered at the Money Museum. Titas Budrys, Advisor to Member of the Board, talked about what the Bank of Lithuania does, what changes have taken place since Lithuania’s accession to the euro area, answered questions from members of the audience, which was exceptionally large this time.

The cycle of lectures is to be continued — the next lecture will take place on 20 January next year and we will introduce the history of the Bank of Lithuania.
The following are the ten main things covered yesterday, presented here for everyone who did not attend the lecture.

– The Bank of Lithuania (BoL) is the central bank of the country, which (jointly with the European Central Bank, or the ECB) conducts the monetary policy of Lithuania, the primary objective of which is price stability and the indirect one — economic growth and financial stability of the country.

– Monetary policy instruments include: control of currency in circulation (affects inflation), interest rates (affect banks’ interest rates for businesses and residents), regulation of currency exchange rates (affects imports and exports), currency printing (affects inflation, banks’ interest rates, investment).

– The tradition of the fixed litas prevailed in Lithuania for a long time. In 1994, the litas was pegged to the US dollar, as of 2002 — the euro. A fixed exchange rate in such a small and open economy as Lithuania enables to achieve relative price stability in the long term, thereby creating a non-inflationary environment for the economy. Lithuania has always maintained a fixed exchange rate without fluctuations.

– The Eurosystem is the euro area monetary policy authority comprising the European Central Bank and the 19 European Union Member States that have adopted the euro. The key mission of the Eurosystem is price stability (inflation target — maintaining it at an average of 2%), while its tasks include: monetary policy, foreign exchange transactions, promotion of smooth functioning of the payment system and maintaining/management of official foreign reserves. Lithuania is an equal partner within the Eurosystem with equal vote in decision-making.

– The BoL manages financial assets to the amount of nearly EUR 4 billion, which are invested following the principles of security, liquidity and profitability. 90 per cent of the assets are comprised of euro and foreign currency, the remaining share — of gold (Lithuania has 5.8 tons). The purpose of financial assets is to ensure the stability of the financial systems of Lithuania and of the euro area, create the conditions for successful conduct of monetary policy, ensure the financial independence of the Bank of Lithuania, and provide preconditions for the country to more easily withstand economic and financial shocks.

– The BoL carries out payment system initiatives: the basket of basic payment services (as of the end of September 2016, the use of basic payment services will be at a regulated monthly price), SEPA (as of 1 January 2016 Lithuania joined SEPA; residents have one account to perform and receive payments in euro across the EU), secure payments online (strengthening fraud prevention, better alternatives are being proposed).

– Having become part of the Eurosystem as of 1 January 2015, the BoL, together with 18 other national banks within the Eurosystem, issues into and withdraws from circulation euro banknotes and coins. The BoL is responsible for the production of euro banknotes to satisfy their demand in the country. Banknotes are only printed in printing houses accredited by the ECB; euro coins are minted in the UAB Lithuanian Mint.

– The BoL, jointly with the ECB, carries out supervision of financial market participants (banks, insurance undertakings, credit unions, etc.). Supervision of the 3 largest banks (SEB, DNB and SWEDBANK) has been taken over by the ECB, which, however, relies on BoL staff, resources and experience. The BoL remains in charge of the supervision of other banks. Lithuania has voting rights in the Supervisory Board of the ECB and votes in taking decisions related to all other euro area banks.

– The BoL also performs educational functions (the Money Museum and the website, makes efforts to increase financial literacy.

– The BoL also performs advisory functions (consults and is consulted by the ECB), compiles statistics, carries out international cooperation with non-euro area countries.

Second lecture 3X3 Second lecture 3X3
Money Museum
Last updated: 2021-07-08