VILNIUS, May 24 (Xinhua) -- Concentration in Lithuanian banking sector continues to grow, causing threats to competition in the country's financial system, warned the governor of Lithuania's central bank Vitas Vasiliauskas on Thursday.
"Concentration in banking sector has been growing," Vasiliauskas said in a press conference, "Economies of scale and efficiency is not a bad thing. However, it brings risks to competition, and that, without any doubt, is not good," he said.
Vasiliauskas' remarks come amid shrinking number of banks in the Lithuanian financial sector.
Currently, six banks have banking licenses in Lithuania and six banks operate in Lithuania as subsidiaries of foreign financial groups, though the country's financial sector is dominated only by Swedbank, SEB, Luminor Bank -- all three controlled by major Nordic financial groups.
Vasiliauskas presented on Thursday Bank of Lithuania's (LB) annual Financial Stability Review. According to the review, assets of banks Swedbank, SEB and Luminor Bank account to 82 percent of total assets in Lithuania's banking sector.
Concentration of assets has increased to 82 percent from 73 percent last year with the merger of banks DNB and Nordea into Luminor Bank, a new Baltic banking group also controlled by Nordic banks.
"Even before the merger of DNB and Nordea, concentration in Lithuanian banking sector was one of the highest in Europe," said LB.
Last month, Danske Bank, another competitor in Lithuania, controlled by Danish financial group Danske Bank, revealed its plans to leave Lithuania and Baltic States to concentrate on Nordic operations.
"With the departure of Danske Bank from Lithuanian banking sector, concentration will increase even more," said the central bank in its review.
Banks that have merged or have abandoned the Lithuanian market point to its shrinking market and poor economies of scale dampening profitability.
In recent years, Lithuania has been trying to position itself as a regional hub for fintech companies with favorable regulation in order to bring more competitors into the country's financial sector.