Investment in Luminor Bank's Covered Bonds

Location:

Regional

Project number:

51326

Business sector:

Financial institutions

Notice type:

Private

Environmental category:

FI

Approval date:

11 Dec 2019

Status:

Signed

PSD disclosed:

09 Mar 2020

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Investments of up to EUR 125 million in a series of covered bonds issued by Luminor Bank AS in Estonia ("Luminor") under the Euro Medium Term Note and Covered Bond Programme ("Programme") over a period of 3 years and admited for trading in the Irish Stock Exchange. EBRD's investment in each issue will be limited to 20% of the issue size.

On 4 March 2020, EBRD invested EUR 28 million in the first covered bond issuance of EUR 500 million under the Prgramme.

Project Objectives

The objective of the project is to support the establishment of a new capital market instrument in the baltics. The project supports the first ever issuance of covered bonds in the Baltic States and it is fully consistent with Bank's policy engagement, aimed at development of regional capital markets in the Baltics. 

Transition Impact

ETI score: 65

The project supports the resilience of the financial sector and markets by (i) increasing the supply of investable listed instruments for local and international investors (i.e. covered bonds and the Pan Baltic Covered Bonds), and (ii) helping Luminor diversify the funding sources and improving the asset liability mismatch.The Well-governed quality is underpinned by the EBRD's extensive policy dialogue on the development and integration of the capital markets in the Baltics; which, among other, include (i) supporting Estonia (as well as Latvia and Lithuania) to develop the covered bond legislation, and (ii) the development of the Pan-Baltic Covered Bond Framework that will facilitate the issuance of Pan-Baltic Covered Bonds. 

Client Information

LUMINOR BANK AS

Luminor was established in October 2017 through the merger of Nordea Bank Abp and DNB Bank ASA in the Baltics. Based in Estonia, it is the third largest banking group in the Baltics with a market share of 18.7% in lending across the Baltics. In October 2019, a consortium of private equity funds managed by Blackstone acquired a majority stake in Luminor. It is a systemic bank directly supervised by the European Central Bank ("ECB").

EBRD Finance Summary

EUR 124,734,000.00

For the first covered bond issuance, EBRD invested EUR 28 million.

Total Project Cost

EUR 499,734,016.00

The size of the first covered bond issuance was EUR 500 million.

The total size of the Programme is EUR 3 billion.

 

Additionality

Endorsing a newly developed asset class and innovative structure of Pan Baltic Covered Bond consistent with policy engagement, supporting benchmark size issuances from a relatively new issuer in the international capital markets, providing comfort to other investors given the Bank's role as a significant investor in covered bonds. 

Environmental and Social Summary

Categorised FI. Luminor is an existing client and an E&S Management Plan has been developed to assist Luminor in their implementation of the EBRD ESP's PR9. Luminor is required to comply with PRs 2, 4 and 9; implement relevant EBRD Environmental and Social Risk Management Procedures and submit annual reports to EBRD.

Technical Cooperation and Grant Financing

N/A

Company Contact Information

Olof Sundblad
ir@luminor.ee
+372 628 3300
+3726283201
https://www.luminor.ee/en
Luminor Bank A.S. Liivalaia 45 10145 Tallinn Estonia

PSD last updated

09 Mar 2020

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: projectenquiries@ebrd.com

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Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Project Complaint Mechanism (PCM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g., through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s accountability mechanism.

The accountability mechanism independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit our webpage to find out how to submit a complaint through the confidential online form, by email, mail or telephone. We are available to discuss your concerns and answer any questions you may have about the submission or handling of complaints. Complainants’ identities may be kept confidential upon request.

Please note that after the appointment of the new mechanism Head in 2020, the revised Project Accountability Policy and Guidance will come into effect to guide case handling.

 

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