The European Bank for Reconstruction and Development (EBRD) has agreed to deepen its support for the development of a unified pan-Baltic capital market, working with Estonia, Latvia and Lithuania to remove remaining barriers and strengthen the region’s bid for higher global index classification.

The new cooperation framework, signed as a memorandum of understanding (MoU) during the EBRD’s 2026 Annual Meeting in Riga on June 6, builds on work begun in 2017 and aims to further integrate the three countries’ equity and debt markets with the long-term objective of securing Emerging Market status under the MSCI index classification.

EBRD president Odile Renaud-Basso said the initiative reflects “our joint commitment to take the next step in creating a single, deeper and more liquid capital market in the region”. 

“The Baltic states have made impressive progress in building a regional capital market based on strong cooperation and shared ambition,” she said at the signing ceremony. “This renewed partnership reflects our joint commitment to take the next step in creating a single, deeper and more liquid capital market in the region. A strong pan-Baltic capital market is critical to helping companies across the region to access funding, broaden investment opportunities for both domestic and international investors, and support long-term resilience and growth.”

The EBRD said the three countries had already gone beyond many EU integration requirements, including the consolidation of market infrastructure and the development of common instruments.

The EBRD's priorities under the new MoU include mobilising both retail and institutional investors, encouraging cross-border issuance of financial instruments, and improving access to capital markets for issuers ranging from SMEs to large corporations.

It also envisages expanding thematic investment vehicles in areas such as green energy, technology and infrastructure as part of efforts to deepen liquidity and attract international investors.

Alexander Pivovarsky, EBRD director for capital markets development, said the three countries had already achieved a high degree of integration, including shared trading infrastructure and common market instruments, but warned that further progress depended on increasing the number of companies coming to market.

“We had this initiative for a few years, an MoU was signed before COVID to integrate the markets,” he said in an interview with IntelliNews. “The countries worked together on regional integration and they go beyond what’s required by the EU.”

He said the Baltic states already share core market infrastructure, including a common stock exchange platform and central securities depository, and have developed joint instruments such as covered bonds and commercial paper.

However, he stressed that scale remained the key challenge. “This led MSCI to agree to treat them as kind of one market for index provision,” he said. “But the only thing they are really lacking is the scale of issuances, the number and size of IPOs and listings.”

Pivovarsky told IntelliNews expanding listings would be crucial to moving into the next stage of market development. “They need to find a way to encourage more issuances,” he said. “In practice you need three or more IPOs to really build momentum, and some of the larger companies in the region are still state-owned, which makes listing decisions politically sensitive.”

He said even smaller public companies could play a role in broadening market depth. “There is scope for more smaller companies to be listed,” he added.

Pivovarsky also highlighted structural constraints affecting capital markets in the Baltic states and across Europe, noting that banking remains the dominant source of financing in many EU countries.

“It’s still very much a bank-dominated system,” he said. “And because of the social compact in Europe, households are often not strongly encouraged to invest in capital markets.” He argued this limits equity market growth despite the need for greater investment returns in an inflationary environment.

“With inflation being relatively high, it is clear we need to invest more in capital markets, because equity naturally appreciates with inflation,” he said. “If you just keep money in bank deposits, it is unlikely to keep pace.”

Changing savings behaviour remains a Europe-wide challenge. “There is a lot of discussion about this across Europe, but it is easier said than done.”

European Commissioner Valdis Dombrovskis said the agreement builds on earlier progress and supports broader EU financial integration goals.

“It reconfirms our commitment to deepening and broadening Baltic capital markets and it builds on the solid foundation which was put in place by the first MoU in 2017,” he said.

Dombrovskis also linked the initiative to wider EU strategy. “Deeper and more integrated capital markets in the Baltics can act also as a building block towards our new savings and investment union strategy, a crucial component towards our wider competitiveness agenda,” he said.