New Established Long-Term Financing Framework Offers More Opportunities for Business

2017 05 04
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The Ministry of Finance together with the European Bank for Reconstruction and Development (EBRD) implements the project aimed at introduction of the legal and regulatory framework of covered bonds and securitisation in Lithuania.

At present the European Union lacks sustainable sources of funding for the economy, therefore, this long-term financing framework and its benefits have been eminently actively discussed. For the establishment of this framework in Lithuania, it is necessary to have a comprehensive analysis of the national legal system regulating this particular area and identification of feasible problems precluding from effective its implementation as well as their elimination.

This project is one of priority tasks of the Government Programme Implementation Plan aimed at promoting the development of the Lithuanian capital markets by widening the range of alternative financing sources.

The first stage of the project has been currently completed – the EBRD provided the Ministry of Finance with the report on the valid legal environment for securitisation and formulated proposals for the improvement of the Lithuanian legislation in order to create more favourable legal regulatory environment for the development of the securitisation market in Lithuania.

The second stage of the project foresees the drafting of legislation regulating securitisation as well as related draft legislation.

This common project implemented by the Ministry of Finance and the EBRD will establish new instruments to offer institutional investors to invest into, also expanded opportunities for alternative financing, enhanced effectiveness of financial markets and, at the same time, long-term growth perspectives. The draft legislation is planned to be drawn up already this year, and its adoption – in 2018.

Additional information:

“Securitisation” is a process, in which bonds can be issued with the benefit of security over financial assets. This framework is often used by credit and financial institutions, as it allows to release the capital and increase financing options. This method has been usually used on the residential mortgage market, however eventually it has taken off in other areas (e.g. credit cards, loans for motorcars and etc.).

A comprehensive EBRD report of the first stage of the project is available on the website of the Ministry of   Finance.