Bank of Lithuania promotes capital market development by offering a competitive and attractive credit and investment alternative
The Bank of Lithuania announces the Capital Market Development Action Plan, the implementation of which is expected to bring important changes to the country’s financial system: the capital market would see a significant growth and become more attractive to domestic and foreign investors, alternative financing options would be created for businesses and investment alternatives for individuals. The first changes in the sector are expected already this year.
“The capital market has great growth potential and the Bank of Lithuania wants to exploit it for the benefit of society and the country’s economy. We have carried out thorough preparatory work, foreseen effective measures and hope to make significant progress over the next few years by expanding the opportunities for companies to attract the required financial resources in the capital markets, and for individuals to find new, understandable and secure ways to invest funds,” says Simonas Krėpšta, Member of the Board of the Bank of Lithuania.
To achieve a coherent and effective development of the Lithuanian capital market, it is important that stimulus measures cover all key elements of the capital markets: capital market products, entities, infrastructure, that they focus on improving the legal and tax environment, and that measures are taken at several levels – national, Baltic region (Lithuania, Latvia, Estonia) and EU.
Over the past year, the Bank of Lithuania carried out in-depth surveys of investors, financial market participants and consumers, analysed the current situation and international practices, and at the beginning of this year published a draft Capital Market Development Action Plan. The plan has attracted great interest from investors, financial market participants and other stakeholders, and the Bank of Lithuania has received considerable feedback. The plan will be submitted to the Government for approval. The measures implemented by 2025 are expected to expand the regulated market and the multilateral trading facility by a quarter, to double the crowdfunding market and to increase the number of companies that issued bond issues by three quarters. As a result, the country’s businesses should have significantly more opportunities to attract the funding they need and at the same time to expand and create jobs.
One of the first steps is to set up a Capital Market Council to supervise the implementation of the plan, as there is currently no institution in charge of the overall strategy for the development of Lithuania’s capital market. It would be made up of representatives of both public institutions and private sector’s associations.
The surveys have shown that one of the main problems in terms of capital market development is related to the legal and tax environment, such as requirements or restrictions, which are excessive and not in line with international practice or market needs. The plan therefore foresees specific measures to improve the legal framework, including amendments to the Republic of Lithuania Law on Companies, the legalisation of an investment account, and other proposals to encourage SMEs to raise funding by issuing securities, to extend the possibilities for pension funds to invest in a wider range of financial market instruments, wider listing of state-owned companies to be traded on the stock exchange. It also provides a mechanism for innovative companies operating in the country to efficiently attract external financing on the capital market throughout their entire life cycle, i.e. from their start-up to sustainable development.
It will also promote diversity of financial products traded on the Lithuanian capital market, innovative investment services, increase their accessibility and reduce the cost. Financial literacy will also be a major focus, so that individuals and businesses could get the knowledge they need about investing and financial products.
In view of the respondents’ opinion, further attempts will also be made to classify the Baltic States’ capital markets as emerging markets. This would boost the international investors’ interest in the region.