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European banking heaven: Lithuania boosts efforts to improve banking regulations, Revolut gets Specialised Bank license

European banking heaven: Lithuania boosts efforts to improve banking regulations, Revolut gets Specialised Bank license

28/01/2019

UK-based financial technology giant Revolut has obtained a Specialized Bank license in Lithuania. The license issued by the European Central Bank together with Bank Lithuania will allow the company to provide loans and accept deposits. License secured by Revolut during the BREXIT turmoil going on and rising threat that Revolul UK FCA issued license will lose EU passporting rights.

Revolut is choosing Lithuania for European banking license

Revolut Technologies Ltd., a company that has received a license, will launch deposit and loan operations in the second half of 2019. New banking license will ensure that deposit of Revolut’s customers up to 100 thousand Euro will be covered under the European deposit insurance scheme.

Revolut announced that aiming to get a Specialised Bank license in Lithuania was driven by a favourable environment for foreign companies seeking to launch various financial services in the European Economic Area. Revolut spokesperson told Bloomberg that the company chose Lithuania both because of the “incredibly Fintech friendly” regulatory environment “This licence will help us towards our goal to build an account where you can manage every aspect of your financial life, with the best value and using the best available technologies“, – told Revolut in it’s blog after receiving a license.

Lithuanian licensed banks are allowed to offer financial services in single European Union financial market of 500 million wealthy consumers and 20 million businesses, including such big national markets as France and Germany.

Meanwhile, UK based financial institutions are suffering from Brexit and probably will lose their license passporting rights into continental Europe, Lithuania offers new pan-European banking license just within 6-12 months licensing period. Having minimum equity capital of EUR 1 Million Lithuanian “light” banking license of a Specialised Bank has no equivalents within the rest of European jurisdictions.

The idea of a specialized bank was proposed by the Bank of Lithuania and the relevant laws were drafted, and its purpose was to increase competition in the area of minimum financial services. “Development of an environment conducive to competition and innovation in the field of finance is one of our strategic goals. We aim to ensure that Lithuania’s financial sector provides quality services for consumers as well as creates a favourable ecosystem for business development,” said Marius Jurgilas, Member of the Board of the Bank of Lithuania.

As of January of 2018, there were 117 FinTech companies licensed and operating in Lithuania, 35 of which were registered in 2017. In 2018, the number rose to more than 150. Lithuania has granted 39 Electronic Money Licenses ranking second in the European Union just after the UK (128 licenses) – a country soon exiting the EU.

“It is a win because they’re attracting brand-name “fintech” and others will follow,” told Revolut’s founder Storonsky last year for the media.

Unique pan-European banking license to operate across the EU/EEA

Lithuanian licensed Specialised Bank provides significant competitive advantage and opens up European financial market at significantly lower incorporation and operational costs.

Specialised Bank allowed provide all traditional banking services in all (EU/EEA) member-states such as:

– Lending;
– Payment services;
– Receipt of deposits;
– Currency exchange;
– Issuing of e-money;
– Issuing guarantees;
– Fund administration;
– Financial leasing;
– Financial intermediation;
– Creditworthiness assessment services;
– Safe-deposit box rental.

The Specialised Bank is restricted only in investment and pension fund management as well as investment advice and securities brokerage. This restriction easily dissolved by incorporating parallel Brokerage company licenses under MIFID directive, Investment Fund Management Company or getting full banking license having EUR 5 Million equity capital requirement.

Lithuania and primarily its capital Vilnius already became a new hub for European financial service centres. Favourable regulatory and tax environment, excellent infrastructure, fastest internet, cheap office space and quality pool of relatively cheap employees makes Vilnius attractive for large international banking and finance institutions. UK giant Barclays Bank has been operating Barclays Technologies Centre Lithuania in Vilnius since 2009 servicing Barclay’s businesses across the world. Scandinavian rivals SEB, Swedbank, Danske Bank as well as finance industry leader Western Union, world’s biggest stock exchange operator NASDAQ have service centres in Vilnius too. NASDAQ also operates Vilnius Stock Exchange and Securities Depository in Lithuania and other Baltic states.

Recently Google Payment, a company owned by Alphabet Inc., obtained an e-money license in Lithuania, which will allow the company to issue electronic money, handle electronic money wallets, perform remittances, payment transactions, provide cash deposit and withdrawal services, as well as perform direct debit and credit transfers across the European Union.

“The idea of a Specialised Bank was proposed by the Bank of Lithuania and the relevant laws were drafted, and its purpose was to increase competition in the area of minimum financial services. Recently, we have a strong interest from potential market participants from abroad. In particular, a Specialised Bank license is of interest to foreign investors from Israel, Germany, China, Singapore, the United States, the United Kingdom, Estonia, Latvia, Poland, Sweden and other countries”, – told M. Jurgilas, member of the Board of the Bank of Lithuania, to “Verslo žinios”.

Lithuanian licensed Specialised Bank provides significant competitive advantage and opens up European financial market at significantly lower incorporation and operational costs.

Specialised Bank allowed provide all traditional banking services in all (EU/EEA) member-states such as:

– Lending;
– Payment services;Receipt of deposits;
– Currency exchange;
– Issuing of e-money;
– Issuing guarantees;
– Fund administration;
– Financial leasing;
– Financial intermediation;
– Creditworthiness assessment services;
– Safe-deposit box rental.

The Specialised Bank is restricted only in investment and pension fund management as well as investment advice and securities brokerage. This restriction easily dissolved by incorporating parallel Brokerage company licenses under MIFID directive, Investment Fund Management Company or getting full banking license having EUR 5 Million equity capital requirement.

Lithuania and primarily its capital Vilnius already became a new hub for European financial service centres. Favourable regulatory and tax environment, excellent infrastructure, fastest internet, cheap office space and quality pool of relatively cheap employees makes Vilnius attractive for large international banking and finance institutions. UK giant Barclays Bank has been operating Barclays Technologies Centre Lithuania in Vilnius since 2009 servicing Barclay’s businesses across the world. Scandinavian rivals SEB, Swedbank, Danske Bank as well as finance industry leader Western Union, world’s biggest stock exchange operator NASDAQ have service centres in Vilnius too. NASDAQ also operates Vilnius Stock Exchange and Securities Depository in Lithuania and other Baltic states.

Recently Google Payment, a company owned by Alphabet Inc., obtained an e-money license in Lithuania, which will allow the company to issue electronic money, handle electronic money wallets, perform remittances, payment transactions, provide cash deposit and withdrawal services, as well as perform direct debit and credit transfers across the European Union.

The Lihuanian business daily “Verslo žinios” sees 3 most important factors recently attracting foreign finance institutions to set up in Lithuania:

– Opportunity to set up Specialised Bank – a credit institution with a EUR 1 Million equity capital created.

– Since July 1, 2017 only 0.1% of the total amount of deposits is enough to cover the banks’ deposit insurance. Deposit insurance fee reduced from the previous 0.3% rate.

– The license fee for bank license will be reduced soon from EUR 50,000 to EUR 5,000.

Attorney at law at Vilnius based international law firm ECOVIS ProventusLaw specializing in finance institutions licensing Ms. Inga Karulaitytė-Kvainauskienė admits the following advantages:

–  Fast licensing process. Issue of the license within period of 6-12 months.

– The documents can be submitted in English and amended “on the go” instead of formal writing forth and back.

– Direct access to all EU/EEA financial markets and Single Euro Payments Area (SEPA). Bank of Lithuania offers to join CENTROLink Regulator managed system to all Lithuanian licensed payment service providers.

– Client banking deposits up to the amount of EUR 100 000 ensured according to EU regulations in the state deposit and investment insurance agency at the low 0,1% insurance rate.

– Remote client verification allowed. Innovative “know your customer” processes for remote client verification allows open the accounts without physical presence of the client.

– No sanctions for the first year. The Bank of Lithuania (Regulator) is committed to support newly licensed companies and not to punish them during the first year of operation for minor infringements.

– Startup visa. Special visas for the citizens of non-EU/EEA countries running innovative finance businesses in Lithuania.

ECOVIS – experienced financial licensing advisor

Being part of ECOVIS International consulting network present in more than 70 counties around the world ECOVIS ProventusLaw currently considered as the most experienced financial licensing advisor in Lithuania. ECOVIS ProventusLaw provides all the necessary services for
the bank licensing, including preparation of licensing documentation, representation at the Bank of Lithuania (Regulator) during the licensing procedure, company incorporation, office registration, advice on IT, HR, compliance and other issues rising during the incorporation of banking business in Europe. After the licensing procedure completed, ECOVIS offers accounting, reporting, audit, compliance and legal services for the operational business.

More about Specialised Bank licensing – https://ecovis.lt/fintech/specialized-banks/

More about finance institution licensing in Lithuania – http://ecovis.lt/fintech/

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