The ins and outs of eurozone regulation

Lucy Fitzgeorge-Parker
Published on:

Lithuania and its fellow Baltic republics are in an unusual position when it comes to euro adoption. Whereas in the rest of emerging Europe the majority of banks are outside the eurozone, but owned by lenders within, in the Baltic states the situation is reversed.

Four Scandinavian banks – DNB, SEB, Swedbank and Nordea – dominate the banking sectors of their Baltic neighbours. All come from non-euro countries, while two of the Baltic republics – Estonia and Latvia – have already adopted the euro and Lithuania is expected to follow suit in January 2015.

In some respects, this might work to the Baltic states’ advantage. Unlike in central and southeastern Europe, there are no fears of deleveraging as parent banks adjust their balance sheets in the run-up to the European Central Bank’s asset quality review later this year.

Ingrida Simonyte,
Bank of Lithuania

It does, however, present a unique challenge for the region’s regulators. As Ingrida Simonyte, deputy chairperson of the Bank of Lithuania, notes, with the Nordic-Baltic region expected to remain very heterogeneous in terms of euro membership in the short term at least, it is particularly important to ensure that all states in the region are treated equally from a regulatory perspective.

"In our view, the recently adopted Single Supervisory Mechanism (SSM) strikes a good balance between different views and responds to our earlier concerns about the equal treatment of euro ins and outs to the extent possible under the EU Treaty," she says.