RegRally Insights: EMI/PI Regulation

This month’s edition covers key developments in Lithuania’s financial regulatory landscape and beyond. From a landmark Supreme Administrative Court ruling overturning the Bank of Lithuania’s licensing decision to the rollout of the Verification of Payee service and upcoming direct access for non-bank institutions to the TARGET system, these updates mark important shifts in supervision, compliance, and payment infrastructure.

We also highlight recent enforcement actions, regulatory simplification initiatives, and guidance relevant to all market participants seeking to navigate Lithuania’s evolving financial ecosystem with confidence.

Supreme Administrative Court Overturns Bank of Lithuania Decision on Specialized Banking License

On 17 September 2025, the Extended Chamber of the Supreme Administrative Court of Lithuania (LVAT) partially upheld the appeal of UAB Baltic Financial Company, overturning both the 2023 ruling of the first-instance court and the Bank of Lithuania’s resolution denying the company a specialised banking licence. The part of the case concerning €1,008,124.21 in claimed damages was referred to the Regional Administrative Court for re-examination.

The Bank of Lithuania refused the licence because the company’s business plan did not ensure safe and reliable banking operations. While the court confirmed that the Bank enjoys broad discretion in assessing such matters, it emphasised that this discretion must be exercised lawfully and subject to judicial review.

The court noted that the Bank’s conclusions about the business environment were unsupported by concrete data and not directly linked to the applicant’s business plan. As a result, the finding that the plan failed to ensure safe and sound operations was not substantiated by evidence, and the Bank’s decision lacked adequate factual and legal reasoning.

The ruling underscores that supervisory authorities must ensure transparency, factual justification, and procedural fairness when exercising discretion in licensing decisions.

Bank of Lithuania Launches Verification of Payee Service for CENTROlink Participants

The Bank of Lithuania introduced a Verification of Payee (VoP) service for CENTROlink participants, allowing verification of whether the recipient’s name matches the payment account details. This service supports the Instant Payments Regulation, which, from 9 October 2025, requires all payment service providers (PSPs) to offer name–account checks before executing transfers.

The measure aims to enhance payment security, prevent misdirected transfers, and reduce fraud risks. PSPs using CENTROlink must apply, test the service, and sign a VoP Service Agreement with the Bank. The service will operate 24/7 and cost EUR 0.002 per query.

Recommendations for PSPs:

Ensure Immediate Compliance

Verify that your systems and customer interfaces are already integrated with the CENTROlink VoP service.
If not yet connected, please submit the required application to the Bank of Lithuania as soon as possible.

Strengthen Operational Readiness

Conduct post-implementation testing to ensure smooth performance and accurate name–account matching.

Update customer communication to reflect the new verification process.

Enhance Fraud Prevention and Customer Awareness

Combine VoP with existing AML/CTF and fraud monitoring tools.

Inform customers about the added layer of protection and encourage them to use instant payments safely.

Monitor Costs and Optimise Usage

Factor the EUR 0.002 per-query fee into operational and pricing models.
Track query volumes to balance security, compliance, and cost efficiency.

Non-bank payment institutions to gain direct access to TARGET payment system from 6 October

As of 6 October, electronic money institutions (EMIs) and payment institutions (PIs) providing payment services gain direct access to the TARGET payment system operated by the Eurosystem, except for the T2S system used for settling securities.

When participating in TARGET, payment service providers may:

reach more than 39,000 system participants directly when making payments;
settle in central bank money, thereby reducing credit and settlement risk;
manage liquidity independently from commercial banks or third-party infrastructure;
use the same infrastructure as banks, which is essential for efficiency, transparency and operational resilience;
directly access Eurosystem settlement solutions, including the TIPS platform for instant payments.

Direct access to TARGET is subject to the entry into force of Guideline ECB/2025/28 of the European Central Bank, which allows national central banks to grant access to TARGET to non-bank payment service providers on a discretionary basis.

Since mid – April, EMIs and PIs have gained direct access to payment systems across Europe, including retail payment systems operated by central banks. However, direct access to TARGET has been postponed due to delays in some euro area countries in transposing the necessary amendments to the Settlement Finality Directive and Payment Services Directive.

The Eurosystem operates the TARGET payment system, which ensures the free movement of cash, securities, and collateral across Europe. TARGET services include T2 (for settling payments), T2S (for settling securities), TIPS (for settling instant payments), and ECMS (for collateral management).

So far, only banks and other credit institutions have had direct access to TARGET.

The national central banks assess and decide on requests to participate in TARGET. In Lithuania, the Bank of Lithuania manages access to the TARGET system.

Bank of Lithuania Advances Regulatory Simplification and Risk-Based Supervision

To strengthen Lithuania’s financial market competitiveness, the Bank of Lithuania is reducing administrative burdens and aligning supervisory requirements with EU practices. Following its risk-based supervision policy, the Bank applies proportionate and more flexible regulation in lower-risk areas, enhancing the sector’s attractiveness.

A key milestone was the amendments to the Law on the Prevention of Money Laundering and Terrorist Financing, effective since July 2025, developed jointly with other authorities and market participants. The changes allow simplified customer due diligence for lower-risk clients and sectors (such as fintech, life insurance, and pension companies), and streamline procedures for document validation and data verification from reliable sources.

The Bank also updated its resolution on EU banking regulation exemptions, allowing stricter oversight of higher-risk credit institutions and greater flexibility for lower-risk ones. Additionally, the General Regulations on Authorisation Procedures were revised to ease administrative requirements:

Legalised or APOSTILLE-certified documents from abroad are now required only when authenticity must be verified;
Licensing documents must be submitted electronically;
Certification of document copies has been simplified.

Earlier this year, the Bank invited financial market participants to propose improvements by comparing Lithuania’s regulations with those of other EU countries. Feedback is being implemented progressively, including:

Extending reporting deadlines for credit unions;
Reviewing the requirement for a spouse’s power of attorney in financial instrument sales;
Updating inspection and supervisory processes;
Assessing collective investment and licensing frameworks for further simplification.

Bank of Lithuania Fines Paysera LT for Unauthorised Acquisition and Reporting Failures

The Bank of Lithuania found that Paysera LT, UAB breached legal requirements by acquiring 100% of the shares of UAB Finansinės paslaugos “Contis” before the statutory assessment period ended and without regulatory approval.

In April, the Bank of Lithuania objected to the acquisition after Paysera failed to provide key information needed to assess:

the acquirers’ reputation and financial soundness,
money laundering and terrorist financing risks,
proposed management after the acquisition, and
ongoing compliance with prudential requirements.

Paysera has since submitted a renewed application, which is under review. Until authorisation is granted, the company cannot exercise voting rights attached to the acquired shares.

Separately, Paysera missed statutory deadlines to approve and submit annual financial statements, allocate profits, and file other required reports.

Given the nature and scale of violations and the company’s 2024 income, the Bank of Lithuania imposed a €400,000 fine, ordered Paysera to rectify reporting breaches by 30 September, and strengthened internal controls to avoid future non-compliance.