Global Impact Award: Bank of Lithuania

The Bank of Lithuania’s Newcomer Programme is designed to attract and grow worldwide fintech talent. “Our country is known as the fintech hub of Europe,” says Bank of Lithuania’s chairman of the board, Gediminas Šimkus. Since its launch in 2016, the programme has had participants from 78 countries, with the number of fintechs taking part increasing from 94 to 179 over the past 12 months.

The Newcomer Programme is the fintechs’ first contact with the central bank, chief business development officer, Lukas Jakubonis, tells Central Banking. The Bank of Lithuania gets a first impression of companies that want to come on board, filters their applications and offers to guide them through the licensing process. The number of fintechs operating in Lithuania rose from 64 in 2015 to 263 in 2022.

As part of this process the central bank asks the fintechs about their strategies. “Do they know the rules, especially those related to anti-money laundering [AML] and counter-terrorism financing [CTF]?” asks Jakubonis. “What about the risk management mechanism – do they have enough knowledge and experience to create and maintain one?” The central bank also asks about the regulatory challenges firms face in obtaining a licence.

Last year, the Bank of Lithuania also operationalised the Centre for Financial Market Development. The 15-strong centre, in co-operation with other national institutions, diplomats and government officials, is striving to contribute to the growth of the financial sector in Lithuania. The central bank is active in proposing changes to the law.

“We want to go further and boost the growth of the entire financial sector by increasing competition, access to services and strengthening the capital market,” says Šimkus. This will create “high added value for our citizens, businesses and the country’s economy”.

Addressing the central bank’s ability to supervise the growing fintech sector, Jakubonis says the central bank has scaled up its resources in response to the increase in the number of supervised entities and equipped itself with better tools. This year, 14 members of staff have joined the supervisory team, and there is a separate division of 20 people dedicated only to AML/CTF supervision. In a recent study by the European Central Bank, Lithuania received the most electronic money and payment institution applications, but the difference between the number of fintechs that received a licence and the number that applied was significantly higher than in other countries.

Brexit was also a blessing for Lithuania’s fintech strategy, says Jakubonis, as firms look to relocate. Broadly, the central bank is also seeing an evolution from fintechs specialising in payments and open banking to open finance. In its proactive approach to attracting fintechs, the central bank divides financial markets into four subsectors: payments, credit, insurance and capital markets. “Then we identify the issues we need to solve in each of them,” says Jakubonis.

Explaining how the central bank has been addressing the concentrated credit market in Lithuania, the team looks at whether an existing bank plans to expand to Europe. “If they have sustainable business and compliance extension plans or [plans to] expand their operations from current European destinations, we feel comfortable to approach them,” says Jakubonis. “We call, we email. We do a lot of work with local diplomats on the ground.”

Members of the Lithuanian government help arrange meetings in foreign countries. “They are our strategic partners. It is Lithuania’s unanimous approach,” says Jakubonis. “We started out together, took a strategic decision to support innovations and fintech and reach this goal together.”

While visiting other countries, the Bank of Lithuania also aims to nurture relationships with the local central bank. “We are eager to share our experience with the central banks or financial conduct authorities of other countries and exchange practices – if they are interested and willing,” says Jakubonis.

Regarding insurance and capital market developments, the central bank has different targets and different techniques on how to approach each of them.

Meanwhile, the central bank continues to work closely with the already established fintech sector in Lithuania. “We have a very close relationship with the fintech ecosystem based on constructive dialogue and partnership,” says Jakubonis. “We periodically meet with fintech associations to calibrate our views and to discuss the main problems, questions and possible solutions, during which we look for ways or opportunities to improve our work.”