Lithuania courts idea of establishing a state commercial bank

The idea of a state commercial bank is not new in Lithuania, but it resurfaced in late October, when the Lithuanian parliament’s Committee on Budget and Finance, which was investigating the circumstances surrounding the 2009 financial crisis, proposed to the government to consider a possibility to establish a commercial state bank.

“I am really in favour of establishing such a bank. But I am afraid the state has already missed the best chance to create it – I mean when the state was nationalising the embattled Snoras bank. Setting up a national commercial bank from scratch would be too costly now,” Povilas Gylys, economist and professor of Vilnius University, told BNN.

President in favour of state commercial bank

Lithuania’s President Gitanas Nausėda weighed in on the proposal only this month, saying that the existing situation in the Lithuanian banking market “makes one to start thinking about the establishment of a state commercial bank”

“In that respect, I would very seriously think – together with the government – about the establishment of a state commercial bank. In the existing situation, this alternative shouldn’t be a taboo. I think we could start discussions on ways to establish a state commercial bank in Lithuania,” he added.

The Lithuanian government has proposed introducing a 0.03 monthly rate tax on assets exceeding 300 million euros of banks, credit unions and other loan issuers as of next year.

It would be too costly

Finance Minister Vilius Šapoka believes that creation of such bank would involve huge costs and risks. «There’ve been such banks in Lithuania and we all know very well how that ended…The risks are really high. A decision to create a new state bank would require huge amounts of money,» he said. According to the minister, it is questionable whether a state-run commercial bank could operate sustainably. «Other countries’ experience shows that such banks often begin to take too much risk and eventually need to be rescued with taxpayers’ money…I believe other solutions can be found without such a risky move,» he added.