Sorainen assisted the Lithuanian Ministry of Finance in drafting the Securitisation and covered bond law. The purpose of the law will be to contribute to Lithuanian capital market development and expand financing source options. The new draft law ensures greater opportunities for financial institutions to attract funds and finance business, thus contributing to long-term economic growth in the country. The draft law is expected to be adopted in the spring session of the Lithuanian Parliament.
The draft law is the result of an initiative of the Lithuanian Ministry of Finance together with the European Bank for Reconstruction and Development, and aims to introduce the legal and regulatory framework for covered bonds and securitisation in Lithuania.
Securitisation is a transaction in which securities are issued based on a portfolio of issuers’ claim rights, such as housing loans. The value or profitability of the securities depends on the portfolio risk. In this way, investors are also offered an opportunity to invest in loans or other positions that would otherwise remain directly inaccessible. The funds received enable the issuer to finance businesses. This method has generally been used in the residential mortgage market. However, it has eventually taken off in other areas, such as credit cards and loans for motor cars.
Regulated covered bonds are debt securities issued only by credit institutions. They are secured by the target group of assets to which bond holders as privileged creditors enjoy claim rights. The purpose of a regulated covered bonds system is to encourage the usage of these bonds and to establish them as a stable and economically effective source of financing for credit institutions and to provide investors with wider and safer investment opportunities.
Comments Deputy Minister for Finance Loreta Maskaliovienė: “With this project we are seeking to create a clear legal foundation for issuing long-term financing instruments in which institutional investors can invest. Financial institutions issuing these instruments would have an opportunity to free capital and use the funds received to increase business funding opportunities, including medium and small businesses as well as natural persons. It will contribute to our long-term economic growth and financial independence.’
Sorainen assisted the Ministry of Finance in carrying out a comprehensive analysis of applicable legal acts and preparing the draft law and drafts of accompanying laws.
The client was advised by partner Tomas Kontautas, senior associates Dalia Augaitė and Indrė Ščeponienė plus associate Eglė Mazėtytė. Sorainen assisted the client in collaboration with the international expert Richard Kemmish.