A New International Financial Instrument to Attract Investments

Date

2019 04 24

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On Wednesday, Minister of Finance Vilius Šapoka attended the European Covered Bonds Council (ECBC) meeting in Riga, where the investors, regulators and banks were presented the Baltic States Initiative – the development of a pan-Baltic framework for covered bonds. This is the biggest event with regard to covered bonds in Europe which takes place for the first time in the Baltic states.

“The Baltic States Initiative to create a common capital market is visible and appreciated in Europe. A uniform legal regulation, the introduction of new financial instruments and establishment of infrastructure necessary for the market will offer more opportunities for financial institutions to attract funds for financing business, also will trigger the turnout of new international investors in the region and will enhance competitiveness of the Baltic states in financial markets”, says Minister of Finance Vilius Šapoka.

One of the first projects of the Baltic states – the development of a pan-Baltic framework for covered bonds. It should ensure that in order to issue covered bonds, the banks could use the assets, as underlying assets, from all three states. Thus, raising attractiveness of the created instrument.

The draft Law on Securitisation and Covered Bonds is planned to be submitted to the Seimas for its consideration at this Spring Session.

 

Additional information:

  • In March 2018, Estonia, Latvia and Lithuania agreed on creation of a pan-Baltic capital market supported by the European Commission (EC) and EBRD to strengthen their economies and promote investments in job creation.
  • In July 2018, the Ministry of Finance submitted for public consultation the draft Law on Securitisation and Covered Bonds offering more opportunities for financial institutions to attract funds and finance business ventures and thus, contributing to the promotion of the long-term economic growth.
  • In March this year, the EBRD together with consultants presented an interim report on a uniform regulation of pan-Baltic covered bonds. The report segregates the basic areas on a uniform legal regulation of which Lithuania, Latvia and Estonia should agree in their national legislation.
  • Securitisation is a process when an issuer (credit, financial institutions) combines several kinds of financial assets and, on the basis of which, issues securities. Thus, new securities are created to be offered to investors, and the issuer from new funds available may fund more the domestic business. Usually, this financing instrument has been used for housing market, however, eventually, it has been caught on also in other areas, e.g. credit cards, car loans and etc.