The finance ministers of Estonia, Latvia and Lithuania announced on November 6 that they had agreed to create a pan-Baltic capital market to strengthen their economies and stimulate investment. Toomas Tõniste (Estonia), Dana Reizniece-Ozola (Latvia) and Vilius Šapoka (Lithuania) signed a Memorandum of Understanding in Brussels in which the three countries agreed to harmonise capital market regulations and dismantle investment barriers. All three Baltic States suffer from a number of constraints caused by the relatively small size of their markets: the agreement should help them overcome such limitations.
“Functioning capital markets are crucial for the economy as they diversify the enterprises’ financing sources, enable them to grow, fund expansion and create new jobs, and thus increase the added value in the economy,” said Mr Tõniste. “Building a well-functioning capital market should be our common purpose and implementing only a few isolated and local measures will not suffice. Hopefully this memorandum is an important step bringing coordinated activities and measures towards a joint capital market, attracting local market and foreign investors.”
Mrs Reizniece-Ozola underlined importance of the new initiative in terms of boosting the number of IPOs. “We expect to multiply the number of new IPOs in our equity market and mobilise our local investment by pension funds and other institutional investors,” she said. “All these measures together should lead to the long-term objective achieving the emerging market status that would further facilitate capital inflow and deepen access to finance.”
While no fixed timeline for the roll-out of the new pan-Baltic capital market has yet been announced, it was confirmed that one of the first projects under the agreement is the creation of a legal framework for a pan-Baltic covered bond.
“This memorandum is an example of good cooperation and synergy among the three Baltic states,” said Mr Šapoka. “It is gratifying that the Lithuanian and EBRD initiative on covered bonds and the securitisation regulatory framework has been expanded into the Baltic capital markets development project.”