Since 1991, Lithuania has reorganized its banking sector numerous times. A myriad of banks emerged after independence, most of them weak. Consequently, consolidations, mergers, and collapses became a regular feature of the country's banking system.
On 3 July 1992 the government adopted a new currency unit, the lita, to replace the ruble. Between 1992 and 1995, six banks lost their licenses and two were merged; as of mid-1996, 16 were either suspended or facing bankruptcy procedures. The first serious crisis centered on Aurasbankas, the eighth largest bank in the country, and the deposit bank for many ministries. The Bank of Lithuania suspended Aurasbankas's operations in mid-1995 because of liquidity problems caused by bad lending and deposit-taking practices. In July 1995, the minimum capital requirement for existing banks was raised from L 5 million to L 10 million, the level already established for new banks. By May 1999, only five commercial banks remained. Moreover, foreign investment by Sweden's Swedbank and SE-Banken, helped keep Hansapank-Hoiupank and Uhispank-Tallinna, respectively.
Operations at Lithuania's largest bank, the Joint-Stock Innovation Bank, were suspended on 20 December 1995, and those of the Litimpeks bank, the country's second largest, two days later. The two were in the process of merging to create the Lithuania United Bank and the fraud was uncovered during premerger audits. Due to rumors of a devaluation of the currency, a shortage of foreign exchange throughout the whole banking sector was created.
The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $1.7 billion. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $3.2 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 3.37%.
The National Stock Exchange, which opened in September 1993, is the most active in the region, with 245 listed companies. Monthly turnover by the end of 1994 had reached L 20.8 million. The market gains continued into 1999 as the index rose 15%.
In 1997, a key feature of the new economic framework in Lithuania was the pegging of the lita to a currency basket composed of the dollar and the D-mark. In 1999, the Bank of Lithuania announced its intention to peg the lita to the euro in 2001.