The Nordic Investment Bank (NIB) has announced it is joining the European Bank for Reconstruction and Development (EBRD) and the central banks of Estonia (Eesti Pank), Latvia (Latvijas Banka) and Lithuania (Lietuvos Bankas) to jointly develop a regional market for commercial paper.

Commercial papers (CPs) are short-term unsecured promissory notes issued by companies with a fixed-term maturity,  used to address short-term liquidity or working capital needs. Demands for such alternative sources of finance are rapidly increasing in the current coronavirus pandemic.

Alexander Pivovarsky, EBRD Director, Capital Market Development, said: “We are very pleased to welcome the NIB as partner in our initiative to help launch the commercial paper market in the Baltic countries. With such a strong and respected international financial institution on our side, the capital market development in the region would get an additional boost with tangible benefits for the real economy.’

Gunnar Okk, NIB Vice-President & Chief Operating Officer, said: “NIB is delighted to collaborate with the EBRD and the Baltic central banks to foster market efficiency and the business environment in the Baltics. This pan-Baltic initiative to develop the regional CP markets is crucial especially now, when the bank’s member countries are facing short-term liquidity problems due to the coronavirus crisis.”

A memorandum of understanding sets out the principles of cooperation to develop a deeper and more efficient regional CP market in line with the best practices outlined in the “Short-Term European Paper” by the European Central Bank (ECB). It states that the papers must be freely transferable and capable of being traded over-the-counter.

The Nordic Investment Bank (NIB) has been active in the Baltic countries ever since they regained their independence. Since 2005, Estonia, Latvia and Lithuania are members of NIB on the same terms as the five founding countries—Denmark, Finland, Iceland, Norway and Sweden.

The EBRD has been actively involved in the development of the capital markets in the three Baltic states and in 2018, together with the European Commission, sponsored the signing of a memorandum of understanding between Estonia, Latvia and Lithuania to create a pan-Baltic capital market to strengthen their economies and stimulate investment to create jobs.

The EBRD has been investing in the Baltic states since 1991. To date, the bank’s total investment there stands at more than €2.5bn through more than 280 projects.