Estonian banks could debut in the covered market as early as October following the approval of a legal framework, a move that would constitute a crucial step forward for a transnational initiative to create Baltic covered bonds as lenders strive for independence. The ministries of finance of Estonia, Latvia and Lithuania are working to establish a pan-Baltic capital market to overcome constraints the individual countries face because of their small sizes. This incorporates efforts to establish a Baltic covered bond market, which would allow banks to issue covered bonds backed by assets pooled from across the three countries. Baltic banks are yet to issue covered bonds. The project would open a new, reliable funding source for Baltic lenders as they try to stand on their own two feet, at a time when decades-old ties between Nordic banks and Baltic banks are weakening.
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