Business Plan Requirements for a Financial License in Lithuania

The Supreme Administrative Court of Lithuania annuls a specialized bank license refusal for inadequate reasoning – and marks out the limits of the supervisor’s assessment, with consequences for banks, CASP, EMI, PI and crowdfunding applicants alike

What must an activity (business) plan contain to obtain a financial license in Lithuania – and what the Bank of Lithuania may assess

Any business preparing to apply for a bank or specialized bank, crypto-asset service provider (CASP), electronic money institution (EMI), payment institution (PI), crowdfunding or any other license in Lithuania invests heavily long before it ever sees a decision – capital locked up to form the share capital, hiring the teams, months of drafting, and repeated rounds of comments from the Bank of Lithuania on its activity plan and program of operations. The obvious questions for such an applicant are: on what basis can the supervisor say „no”, and what does a lawful refusal actually have to contain?

The Supreme Administrative Court’s ruling gives concrete answers to both of those questions – on what basis the supervisor may say „no”, and what a lawful refusal must contain. It marks out what the Bank of Lithuania may legitimately weigh when it assesses whether a future bank will operate „safely and soundly” – and it sets a clear evidentiary standard the supervisor must meet before it can refuse on that ground. For anyone at the pre-application or authorization stage, it is a practical map of where the supervisor’s discretion ends and where an applicant’s leverage begins.

And although the case concerns a bank license, its most important lessons are not confined to banking. The ruling is directly relevant beyond bank licensing – to CASPs, PIs and EMIs, crowdfunding companies and financial brokerage companies – because both rules the Court applied – no refusals on the ground that the business is not worth doing, and no refusals without reasons – come from the Civil Code and general administrative law, not the Law on Banks. Any applicant that has received, or fears, a thinly reasoned refusal from the Bank of Lithuania should read on.

On 17 September 2025 the Supreme Administrative Court of Lithuania (the Court), sitting as an extended chamber, delivered its ruling in UAB Baltic Financial Company v. Bank of Lithuania (administrative case No. eA-111-520/2025). The judgment is a useful read for anyone advising credit-institution licensing applicants, because it confirms how wide the supervisor’s discretion is when assessing an activity plan – and, at the same time, how firmly that discretion is bound by the duty to give reasons.

Background

The applicant, a company with capital from another EU Member State (Bulgaria), applied to the Bank of Lithuania for a specialized bank license. After an extended licensing procedure – a preliminary application under the Newcomer programme, a first application withdrawn and refiled on the same day, several rounds of comments, a meeting, and five revisions of the activity plan – the Bank of Lithuania Board refused the license by Resolution No. 03-18 of 20 January 2022. The stated ground was that the applicant’s activity plan did not ensure the safe and sound operation of the future bank, contrary to Article 9(12) and Article 9(13)(2) of the Law on Banks, read together with Article 43(1)(3) of the Law on the Bank of Lithuania.

The applicant challenged the resolution and claimed over EUR 1 million in damages. The first-instance court (Vilnius Regional Administrative Court) dismissed the claim in full in June 2023. The applicant appealed.

What the supervisor may – and may not – assess

A central plank of the applicant’s case was that the refusal was, in substance, a judgment on the economic desirability of its business, which is prohibited. Two rules were invoked: Article 11 of Directive 2013/36/EU (CRD), under which Member States may not require an application for authorization to be examined against the economic needs of the market, and Article 2.79(3) of the Civil Code (a refusal to grant a license may not be based on the inexpediency of the activity and must be reasoned).

The Court drew a careful line here, and it is the part of the judgment most worth remembering.

The supervisor may not refuse a license on the basis that the market does not need another participant, or that the proposed activity is not worthwhile. That is the economic-needs test the CRD forbids.

The supervisor may, however, assess the viability and sustainability of the business model, the realism of the applicant’s projections, and the surrounding business environment – including comparable institutions, market trends and other external factors. Crucially, the Court held that examining the environment and peers is legitimate precisely because it helps the supervisor test whether the applicant’s own projections are realistic. Assessing the environment to verify the plausibility of a forecast is not the same as assessing whether the market needs the entity. The Court relied on the European Central Bank (ECB) Guide to assessments of license applications, 2nd revised edition, January 2019 (ECB Guide) and the European Banking Authority (EBA) Guidelines on a common assessment methodology for granting authorization as a credit institution (EBA/GL/2021/12), both of which expressly contemplate qualitative and quantitative review of the activity plan, peer comparison, and baseline and adverse scenarios over roughly the first three years of operation.

On this point the applicant’s argument failed. The Court agreed with the first-instance court that the Bank of Lithuania had not assessed economic need, and that the sustainability and viability of the business model are proper qualitative criteria in a licensing assessment.

Wide discretion – but not unbounded

The Court reaffirmed that decisions on whether to grant a bank license are discretionary in nature. Assessing whether an activity plan ensures safe and sound operation involves complex economic and financial judgment, and it serves a significant public interest – the stability of the financial system, which the Constitutional Court has repeatedly recognized as a significant public interest.

The Court also drew on Court of Justice of the European Union (CJEU) case law on decisions taken by the ECB in the exercise of a wide margin of appraisal. Judicial review of such a decision does not substitute the court’s assessment for the supervisor’s; it checks whether the decision rests on materially accurate facts, whether there is an error of law, a manifest error of assessment, or a misuse of powers, and whether the supervisor examined all the relevant elements carefully and impartially and observed the procedural guarantees. Discretion, the Court stressed, is never an unreasoned or unconstrained choice.

Where the resolution failed: the duty to give reasons

Having upheld the supervisor’s power to make the assessment it made, the Court found the decisive flaw in how the assessment was expressed.

The applicant had submitted an activity plan with baseline, growth and adverse scenarios, together with financial projections for each, and had provided further argument on the plan’s realism. Against that, the resolution:

• asserted only in the abstract that the applicant had failed to substantiate its ability to reach the planned lending volumes, without engaging with specific provisions of the plan or the explanations given;
• referred to the competitive environment – the number of active specialized banks in the consumer-lending market, the incumbent’s pre-existing client base, the applicant’s lack of a track record in Lithuania – without naming the entities, quantifying their activity, or tying any of this to concrete provisions of the applicant’s plan;
• raised the negative yield on securities without explaining what effect that would actually have on the safety and soundness of the applicant’s overall planned activity; and
• did not assess at all the adverse-case scenario that the applicant had itself submitted, even though the ECB Guide envisages review under both baseline and adverse scenarios.

In short, the conclusion that the plan did not ensure safe and sound operation was not underpinned by concrete data or linked to specific provisions of the plan set against a data-based picture of the business environment.

The Court held this to be a breach of Article 10(5)(5) and (6) of the Law on Public Administration (the requirement to state the factual basis and the reasons for an administrative decision) and of Article 2.79(3) of the Civil Code. Referring to the CJEU, it recalled that the duty to give reasons – an expression of the right to good administration under Article 41 of the EU Charter of Fundamental Rights and of effective judicial protection under Article 47 – exists so that the addressee can assess whether the decision is flawed and so that the reviewing Court can exercise its control. A supervisor’s duty to reason its own decisions cannot be shifted onto the Court that later reviews them.

Outcome

The Court partially upheld the appeal. It set aside the first-instance judgment, annulled the Bank of Lithuania resolution for inadequate reasoning, and remitted the damages claim to the first-instance court for fresh examination – the essence of that claim not having been examined below, and the applicant needing to specify which defendant it targets and on what basis. The requests to refer questions to the CJEU and to the Constitutional Court were refused, the former partly because the deadline-related questions rested on facts the applicant had not proven. The ruling is final.

Takeaways

The principal takeaway is that the Court mapped out what the Bank of Lithuania may and may not examine.

• It may not refuse a license on the ground that the market does not need another participant, or that the proposed activity is not worthwhile – that is the economic-needs test the CRD forbids.
• It may examine the viability and sustainability of the business model; the realism of the applicant’s financial projections; the applicant’s ability to reach its planned volumes; and the surrounding business environment – comparable institutions, market trends and other external factors – but the environment may be examined only as a tool for testing whether the applicant’s own projections are plausible, not as a proxy for market need. It may also review the plan qualitatively and quantitatively, compare it against peers, and test it under both baseline and adverse scenarios over roughly the first three years of operation.

This is the takeaway that matters during compliance work and at the licensing stage: it tells an applicant which questions it must be ready to answer with data – and which lines of inquiry fall outside the supervisor’s remit and can be pushed back on.

The second takeaway is that a refusal must be reasoned, and the judgment says with unusual precision what a reasoned refusal looks like. It is not enough to assert in the abstract that an activity plan does not ensure safe and sound operation. The supervisor must:

• engage with the specific provisions of the plan and the explanations the applicant gave;
• name and quantify the comparators and market data it relies on, rather than referring to the competitive environment in general terms;
• explain what effect each factor it invokes would actually have on the safety and soundness of the planned activity; and
• expressly assess any adverse-case scenario the applicant itself submitted.

A wide margin of appraisal does not lower that evidentiary bar, and the supervisor cannot shift the task of reasoning onto the court that later reviews the decision.

The practical consequence is straightforward. Where those elements of reasoning are missing, the refusal is vulnerable on judicial review however defensible the underlying supervisory judgment may be – and annulment for inadequate reasoning is a realistic outcome, as it was here.

What this means for your activity plan

The third takeaway belongs to the drafting stage. The judgment does not prescribe what an activity plan must contain, but it shows what the plan will be tested against. Present a baseline, a growth and an adverse scenario with financial projections for each over roughly the first three years, and substantiate the planned volumes rather than asserting them – the assumptions behind the targets, the route to customers, and the pricing behind the projected revenue. Expect the plan to be read against peers and market data, and pre-empt that reading with your own comparison, and keep every explanation given during the licensing dialogue on the record.