Baltic covered bonds could be investments of the future

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Latvia's Finance Ministry is calling for input from investors and market participants alike over the form that a new breed of pan-Baltic investment could take.

Along with Estonia and Lithuania, Latvia is looking at aligning their laws and launching joint "covered bonds" with underlying assets from one, two or all three of the Baltic States.

The Ministries of Finance in Lithuania, Latvia and Estonia signed in November 2017 a Memorandum of Understanding with the intent to create a pan-Baltic covered bond framework.

"The similarity among the three laws focuses, in particular, on the degree of credit protection that the structure provides for investors, identical asset eligibility rules and aligned administration and supervisory practices. It also requires that all three covered bond laws are able to use easily assets in all three countries," the Finance Ministry said.

A consultation is targeted to both domestic and international market participants active in Estonia, Latvia and Lithuania and will take place until 3 April 2019, "and that is the time until when we expect your comments and suggestions," the Ministry said.

The current state of the proposals is available to read online.

If you have comments, questions and suggestions regarding the idea of Baltic covered bonds, you can submit them here.

The Baltic states already operate a highly integrated equity and bond trading system and a Baltic benchmark fund have been created, but the introduction and issuance of joint covered bonds would be another step.

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