VILNIUS, June 13 (Xinhua) -- Lithuania's financial system remains stable amid prevailing international risks and better prepared to withstand potential shocks than before 2008, the Bank of Lithuania (LB) said in its annual financial stability review published on Thursday.
"Although we can observe certain risks to our financial system, their overall level is significantly lower compared to the pre-crisis period before 2008," the Chairman of the Board of the Bank of Lithuania Vitas Vasiliauskas was quoted as saying in a statement presenting the results of the financial stability review.
Stress tests conducted by LB have shown that banks in Lithuania would remain solvent and meet minimum capital requirements in case of "particularly strong economic shock" amounting 6 percent decline in the country's GDP and 22 percent drop in real estate prices.
"The country's financial system is better positioned to withstand potential shocks," said Vasiliauskas.
LB's annual financial stability review highlights stronger lending activity to real estate market in Lithuania and "financial imbalances" in Europe's Nordic countries as two key risks to Lithuanian financial system.
In 2018, the rate of housing transactions per capita in Lithuania reached the highest level since 1990, said LB in its statement.
Though, the central bank also notes that housing supply in Lithuania has been rising alongside demand.
"Currently, the number of housing units built is higher than that observed in 2008," said LB.
According to LB, risks to Lithuanian financial system also stem from "the rise in house prices and high household indebtedness" in the Nordic region.
"Although growth in the Swedish housing market has moderated, the deteriorated international environment and threats to the reputation of Nordic banks posed by money-laundering scandals may weigh on the activities of the region's banking groups," said LB.
Lithuania, a Baltic country with a population of less than 3 million, is exposed to financial risks in the Nordic countries due to Nordic banks' dominance in the Lithuanian financial system.
At the end of 2018, Swedish banks Swedbank and SEB accounted to 60.1 percent of Lithuania's banking system in terms of assets.
