11.5.3 How is this relevant characteristic elaborated in the decisions?

It should be kept in mind that the commitment to improve the risk management is a response to a problem (i.e. a weak risk management). Since there are different kinds of risks, the improvement of the risk management depends on the specific kind of problems of the bank. It can be observed that in some decisions, the emphasis is on the problem; while in other decisions, the commitment to improve is emphasised.

The decision on Lithuanian Central Credit Union (the LCCU) is a prime example of a decision that really stresses the origin of the bank’s problems. The problems concerned a very specific type of risk: concentration risk/single borrower exposure. The LCCU had lend funds (mostly in the form of overnight deposits) to AB Snoras bank. Unfortunately, AB Snoras bank went bankrupt in 2011. Also unfortunately, the exposure of the LCCU to AB Snoras bank was very large. The LCCU did comply with the requirement that the maximum exposure to a single borrower should not exceed 25% of its capital. However, overnight deposits were not included in this ratio. When AB Snoras bank went bankrupt, the deposit of the LCCU in AB Snoras bank became unrecoverable. Consequently, the LCCU experienced serious difficulties. Since the LCCU’s problems were mainly caused by the concentration risk (single borrower exposure), the measures needed to restore long-term viability were mainly aimed at improving the risk management and internal control systems.1 In addition, the LCCU committed to limit its exposure to a single borrower to 25% of its capital independently of the type of exposure (thus including overnight deposits) during the restructuring period.2

To conclude, the way how risk management is mentioned in the decisions depends on the nature of the risk management problems.