From now on, the obligation to provide certain information to the Bank of Lithuania is also established for companies providing unlicensed financial services. Non-banking financial companies or their branches established in Lithuania providing B2B lending (including mortgage loans) and B2B financial leasing services and meeting the significance criterion will be required to provide the Bank of Lithuania with data on borrowers and the debt instruments issued to them. These financial undertakings will also have the right to obtain data from the Loan Risk Database for their own use.
Before the new requirements came into force, only lending market players providing licensed services in Lithuania were obliged to submit data to the Loan Risk Database administered by the Bank of Lithuania, while entities exclusively engaged in B2B lending were exempted.
A financial undertaking will be considered significant if the gross value of its corporate debt instruments for two consecutive financial years (according to year-end data) is equal to or exceeds EUR 50 million.
In this context, corporate debt instruments are understood as any debt instruments granted to:
- Legal entities resident in Lithuania (other than companies of the same group)
- Natural persons who are self-employed or have a business licence and are borrowing for business purposes.
The minimum timeframe for reporting an obligation is four years. This means that financial undertakings will no longer be considered significant and will no longer have an obligation to report if the gross value of their corporate debt instruments does not exceed EUR 50 million for four consecutive financial years.
The Bank of Lithuania will publish a list of significant financial undertakings every year no later than 30 September (this year’s list can be found here). Newly identified important undertakings will have a preparatory period of 18 months before being required to start reporting to the Loan Risk Database.
Recommendations for companies
Although the preparatory period for data provision is relatively long, in practice the actual process of preparation may require considerable time and financial resources, especially depending on whether internal IT infrastructure or third parties are to be used. We therefore recommend that companies that are already on the list, or that have a big chance of being listed next year, assess the impact of such an obligation on their operations and their future business processes in advance.
Furthermore, despite the fact that the fine for breaching the disclosure requirements that can be imposed against the managers of legal entities is relatively small, one should not forget other possible negative consequences of non-compliance with this requirement, such as reputational risk or liability towards investors or business partners.