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First EBRD investment in covered bonds in Estonia

By Axel  Reiserer

EBRD invests in Luminor Bank bonds

  • First issuance of covered bonds in the Baltic states
  • EBRD invests €28 million in debut covered bonds issued by Luminor Bank
  • Investment complements EBRD’s policy reform engagement

The EBRD has invested €28 million in the first ever covered bond issued in the Baltic states to support the establishment of a new capital market instrument in this region. The debut covered bond was placed by Luminor Bank AS, attracting strong demand from a diverse international investor base.

While the first issuance is secured with Estonian mortgages, Luminor plans to add Lithuanian and Latvian assets in the cover pool for the future issuances of pan-Baltic covered bonds.

The development and integration of the capital markets in the Baltic states has been the backbone of the EBRD’s policy engagement in the region. In 2017, the three Baltic states signed a Memorandum of Understanding to create a Pan-Baltic Capital Market and the EBRD, with support from the European Union (EU), is working with the authorities on a number of pan-Baltic projects, including covered bonds.

The issuance represents a significant step towards the realisation of a Pan-Baltic Capital Market and the wider Capital Market Union agenda in the EU.

Lucyna Stańczak-Wuczyńska, EBRD Director, EU Banks, said: “We are very pleased to invest in this debut covered bond issuance in the Baltic states. Deepening and widening the capital market is the next big step in the development of these already advanced economies. The EBRD remains active to lend its support as a potent investor as well as an innovative partner in policy reform.”

Luminor CEO Erkki Raasuke added: “We are grateful to the EBRD for its central role in the development of the Baltic capital markets, as well as for being our investor and sharing in the success of our inaugural issue of covered bonds. We are pleased that investors have shown trust towards the Baltic economies and the newly established covered bond framework”. 

Luminor was established in October 2017 through the merger of Nordea Bank Abp and DNB Bank ASA in the Baltic states. Based in Estonia, it is the third largest banking group in the Baltic states with a market share of 18.7 per cent in lending across the region. In October 2019, a consortium of private equity funds managed by Blackstone acquired a majority stake in Luminor.

The EBRD has invested in the Baltic states since they regained their independence in 1992. To date, the Bank has invested close to €2.5 billion in 277 projects in Estonia, Latvia and Lithuania combined.

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