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Moody's approves of proposed Baltic covered bond market
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    Moody's approves of proposed Baltic covered bond market

    RIGA, Nov 14 (LETA) - International credit rating agency Moody's Investor Service (Moody's) has approved of the plan by the finance ministries of the three Baltic states to jointly develop a legal and regulatory framework for covered bonds, the Latvian Finance Ministry said.

    "Legislation aimed at establishing a covered bond market in the three Baltic countries is credit positive for banks operating in the region. Covered bonds would allow banks to diversify their funding sources and improve their asset-liability matching," Moody's said.

    With covered bonds diversifying banks' funding sources, their reliance on parental funding and sometimes volatile non-resident deposits would decline, the rating agency said.

    "Covered bonds will improve banks' asset-liability matching for mortgages. Baltic mortgages typically have 20-30-year maturities. We expect banks will increasingly fund mortgages with covered bonds, which typically have a 5-10-year term, instead of using uncommitted intragroup and short-term deposits for funding," Moody's said.

    "Combined, the Baltic mortgage markets are large enough to attract international investors; a pan-Baltic mortgage market is between the size of Hungary and Slovakia, which are currently the smallest covered bond markets in Europe," the rating agency said.

    As reported, on November 6 this year the finance ministries of Estonia, Latvia and Lithuania signed a memorandum of understanding about development of a regional capital market in the Baltics.

    • Published: 14.11.2017 14:40
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