The advice of the head of the IMF to Lithuania, which is establishing a state bank: measure three times, then cut

Presidential adviser Simon Krėpšta said after the discussion that various opinions were expressed.

“We have many countries where national development banks are productive and generate benefits for society, the small and medium-sized business sector, and really contribute to economic growth.

We also discuss what the bank should not do. There was practically a general consensus that retail banking should not be part of the bank’s strategy. This part is covered by commercial banks, “he said.

Krėpšta also emphasized that the bank must be professionally managed.

“An independent board, risk standards, very transparent supervision are conditions that have also worked in other countries,” he said.

Finance Minister Vilius Šapoka said that a “unified dictionary” was used during the discussion.

“There is a growing consensus that we need to consolidate existing institutions, national development institutions. When it comes to retail banking, there is also more or less a consensus that it is too risky, too expensive, and will not benefit the country. “, said.

Valius Ąžuolas, chairman of the Seimas Budget and Finance Committee, said that during the discussion a consensus was reached that a bank was needed.

“The sooner we do this, the easier it will be to implement measures like the DNA of the future economy plan, where a lot of money comes from.” This is a great challenge associated with financing. Opinions differ on retail banking, “he said.

Rolandas Valiūnas, Chairman of the Board of the Investor Forum Association, said the state bank has its place in Lithuania today.

“Everyone agrees that retail banking should not be part of this bank’s work.” I think commercial banks would not be afraid of this bank, on the contrary, they would be happy to have a market participant, because it would be solved with fair regulation, they would not see competition problems.

However, there are two problems: political influence and public understanding of what should be the salaries of the executives of said bank, “he said.

Investor Antanas Danys, a former head of Swedbank, said Lithuania has experience in managing state capital.

“Success requires a clear, unchanging strategy, accounting for grants and clear management,” he said.

For his part, President Gitanas Nausėda said that the discussion on the National Development Bank should start with the definition of basic principles.

“Probably the worst thing we could do with the idea of ​​a state development bank is to politicize the activities of this institution. The objective of the supervision of state companies should not be contrary to the principles of independence and professionalism of the bank’s board” the head of state said in the distributed report.

Lutz-Christian Funke, Secretary General of the German State Development Bank KfW, Minister of Economy and Innovation Rimantas Sinkevičius, members of the Seimas, business representatives and economists also participated in the discussion on Thursday.

In her speech, which can be found on the IMF website, Ms. Georgieva spoke about three areas of the financial sector.

“First, a high level of concentration. In Lithuania, the three largest banks own three-quarters of total assets. <...> Second, small and medium-sized companies have inadequate access to finance. <...> Third, banks do not grant enough credit during the economic recession, “he said.

Ms. Georgieva said that a state bank could play an important role in the financial system. However, administering it can also present risks.

“We need to measure three times and only then cut,” advised the IMF chief.

K. Georgieva said that a properly designed state bank in Lithuania could help support economic growth and improve the quality of life for all Lithuanians.

“But achieving that goal requires a transparent assessment of all risks,” he said.

Last week, the Seimas approved a resolution that recognizes the State Development Bank as an important project for the state and forces the government to start consultations with the European Commission in September.

It is considered that the new entity could be based on the Investment and Business Guarantees (Invega), the Public Investment Development Agency and the Agricultural Loan Guarantee Fund.