New Capital Market Development Plan will Increase Investment and Savings Options for Both Residents and Investors
On Wednesday, the Ministry of Finance together with the Bank of Lithuania will submit to the Government for consideration the Capital Market Development Guidelines 2023-2025, which provide the necessary steps for a deeper capital market. This document was prepared in order to promote the stable and competitive development of the Lithuanian capital market, to attract more new investors, to expand the range of new financial instruments attractive to investors, and to improve the cooperation between institutions in order to respond to market needs.
“The Guidelines set out clear recommendations to increase investment and savings options for both residents and investors. The developed capital market will allow the creation of additional financing sources for businesses, particularly for small and medium-sized enterprises. This will contribute to the creation of a high value-added economy and strengthen Lithuania’s, as advanced and competitive economy, position in the international arena “, stated Minister of Finance Gintarė Skaistė.
The Lithuanian regulated market contracted after the crisis in 2009 and has not yet fully recovered — the number of listed issues decreased from 57 (in 2008) to 35 (in 2021), and the share capitalisation-to-GDP ratio widely used in financial markets, which describes market development, has declined several times from 33 % (in 2005) to 9.5 % (in 2021). The share market capitalisation rate is well below the EU average – reaching 70 % in 2021.
Successful capital markets improve business access to long-term finance, increase the variety of savings and investment instruments for residents, while contributing to economic growth. The Lithuanian capital market, despite its current size, the number of market participants and investors, has a great potential to be exploited.
“This Council was envisaged by the Bank of Lithuania as a tool for the management of all measures related to the development of the capital market. Its establishment will be one of the first milestones from which we will measure progress. It is also important to note that the amendments to the Law on Companies have already reached the Seimas, and the Bank of Lithuania is working intensively with colleagues from Latvia and Estonia to harmonise the conditions under which local investors and companies operate. In parallel, we will seek to increase public interest in the capital market as an alternative to investment “, says Chairman of the Board of the Bank of Lithuania Gediminas Šimkus.
One of the most important initiatives of the Guidelines is the establishment of the Capital Market Council. This institution will ensure a dialogue between market participants and public authorities, will be responsible for the overall Lithuanian capital market development strategy and the implementation of the recommendations provided for in the Guidelines, as well as will form a unified position of the Lithuanian capital market participants at EU level.
The Guidelines cover 7 areas: legal and tax environment, supply of new financial products, establishment of the Capital Market Council, activity and infrastructure of the exchange Nasdaq Vilnius, financial intermediaries and financial education. The recommendations proposed for each of these areas, which will encourage small and medium-sized enterprises to attract financing by issuing securities, will increase the variety of financial products traded on the capital market, increase the ability of pension funds to invest in a wider range of financial market instruments, and will allow more securities to be listed on the stock exchange.
“Over the past few years, there have been significant positive developments in the Lithuanian capital market, however its potential to contribute to the transformation and growth of the national economy is not fully exploited. We are delighted that today is another important step towards creating a viable capital market ecosystem “, says Arminta Saladžienė, Nasdaq Vice-President for European market. “We hope that the capital market development measures implemented will help attract more investors and encourage the companies to take more advantage of the options offered by the public stock market. At the same time, it is an important impetus in further development of the investment culture in Lithuania and providing the public with a wider range of options to save and invest “.
The Capital Market Development Guidelines were drawn up following the surveys of financial market participants, investors and lawyers, taking into account the experience of other countries. In drawing up the Guidelines, the Ministry of Economy and Innovation, State Tax Inspectorate (STI), Nasdaq stock exchange and the European Bank for Reconstruction and Development (EBRD) have been consulted. The public consultation attracted significant interest from investors, financial market participants and other stakeholders.
Last updated: 13-02-2023
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