Candidate to lead the Bank of Lithuania: skeptical about the state bank and the distribution of money to companies. Business

Asked by the president of the Seimas BFK Mykolas Majauskas about the idea of ​​creating a state bank in Lithuania, G. Šimkus questioned it.

“It should be noted that Lithuania has already moved from the state capital in the financial sector to the private sector and those trends are also in other countries,” the candidate said at the meeting. “In my opinion, it is not in vain, they are lessons that have been learned and learned.”

He also said that the Bank of Lithuania, as a supervisory authority, would apply the same prudential requirements to a state-owned bank as to commercial competitors.

Furthermore, G. Šimkus emphasized that the state bank must remain apolitical. He also recalled that a bank is a business that requires a large amount of money.

“The question is whether a state bank would really be the best way to reduce concentration and increase the competitiveness of financial services in this market,” said the candidate for president of the central bank.

However, he regretted that, despite all expectations, the concentration of the banking sector has not decreased for a good decade. This problem is often emphasized by politicians and experts, emphasizing the enormous role of Scandinavian banks in the Lithuanian financial market.

According to G.Šimkus, new market entrants could reduce concentration. He also emphasized that although the language in Lithuania is often limited to a few large banks, there are a total of 17 banks and more than 60 credit unions in the country. In addition, according to him, the cooperative banking sector has potential in the country, especially in the regions.

We also have structural problems, as an alternative to conventional bank loans in general: the local capital market is a practically untapped opportunity in Lithuania.

Speaking about fees for banking services, G. Šimkus said that there is a paradox in this area: although there are many players in the market, competitive pressure does not work. He promised to find ways to change the situation.

Asked by former Prime Minister Algirdas Butkevičius about the availability of business loans, the candidate stated that Lithuania lacks an effective mechanism to respond to this failure.

“We also have structural problems, as an alternative to conventional bank loans in general: the local capital market is a practically untapped opportunity in Lithuania,” said G. Šimkus.

“If I became the chairman of the board of the Bank of Lithuania, these are specific areas where I would see that this organization needs to work and lead for change to take place,” he added.

Business support

Asked by Andrius Romanovskis, president of the Lithuanian Business Confederation, G. Šimkus questioned the distribution of subsidies, as he evaluated the assistance provided to companies during the second quarantine introduced due to COVID-19.

According to him, subsidies should in some cases be replaced by repayable aid.

Meanwhile, today, the forms of support initiated by the Ministry of Economy and Innovation to companies that have experienced a drop in turnover include subsidies for personal income tax paid or subsidies for operating expenses.

G.Šimkus emphasized that during the pandemic, the Lithuanian economy probably fell the least in the European Union, and businesses adapted to the new reality.

“When we talk about such broad measures, they should be more in the form of reimbursable support,” said the economist.

“When we talk about subsidies, which are non-reimbursable support measures, they should focus on those businesses, sectors that have experienced the greatest impact and are currently unable to operate,” he added.

Debt management

The conservative Matas Maldeikis during the meeting emphasized the change in attitude of states towards public debt during the pandemic.

Lithuania’s debt is forecast to hit a record high again this year and exceed 50 percent. Gross domestic product.

M. Maldeikis asked the candidate if Lithuania could indefinitely borrow as much as necessary to curb the pandemic, or if restrictions were still necessary.

According to G.Šimkus, this problem is difficult because Lithuania and the world are facing an unprecedented crisis.

“This is not a normal economic crisis, it is a crisis caused by an epidemiological response, so in principle, if (…) we take epidemiological measures and restrict commercial conditions, we do not have to bring the problem to the economic sector, for what the public’s support is very important, ”said the candidate for the presidency of the Bank of Lithuania.

He stressed that Lithuania’s debt level had risen to an unusual level for the country, but it still did not meet the Maastricht criterion applied in the euro area, which stipulates that debt should not exceed 60%. GDP.

“There is no need to be intimidated at this level, because we understand why it arose, why it is necessary, it is necessary to help our economy survive,” said G. Šimkus.

However, the government said it was important to make good use of future European international support to transform the economy as it will grow faster and create the conditions for debt reduction.

The Seimas Budget and Finance Committee approved the candidacy of G.Šimkus by consensus. The Seimas will decide on his appointment as governor of the Bank of Lithuania by secret ballot on Thursday.