• Natalja Tocelovska University of Latvia




corporate bond market, capital market union, bank-based economy, Latvia, development


Baltic region is traditionally treated as similar and comparable when analysed on the macroeconomic level. The major difference is faced when the analysis is performed for the corporate bond market – the weight of Latvian publically traded corporate bonds among the three countries- Latvia, Lithuania and Estonia- reached 94% by the number of issues quoted. With 47 corporate bonds listed in Nasdaq Riga, Latvian corporate bond market demonstrated the rapid growth and recognition of corporate bonds as the source of alternative to bank lending financing method (Nasdaq Baltic, 2017). There are no obvious macro or microeconomic evidence for Latvia meeting more favourable conditions for corporate bond market development than Lithuania and Estonia

The increasing role of the capital market as the alternative to the traditional to Europe banking sector is strongly supported by the European Commission (EC). In 2015 the EC announced the Capital Market Union (CMU) initiative and respective action plan as the reaction to the challenges faced by both banking sector and small and medium enterprise (SME) segment in Europe. As integrated and more diverse capital markets will decrease the cost of funding for companies, the objective of the CMU is to make the financial system more resilient in all 28 Member States including Latvia, Lithuania and Estonia (European Commission, 2017). While several steps like proposal to modernise the Prospectus Directive have been made, further actions based on the review of regulatory barriers to SME admission on public markets and SME growth markets and review of European Union corporate bond markets, focusing on how market liquidity can be improved made in 2017 will follow (European Commission, 2015).

The aim of this article is to analyse the level of development of the biggest Baltic corporate bond market- Latvian corporate bond segment and to reveal the potential CMU introduction effect. The paper applies Financial Sector Development Indicators (FSDI) framework developed by The World Bank (World Bank, 2004) to the country cluster as defined by Bending et al (2014). The paper relates the results to CMU action plan developed by the European Commission. The article estimates that Latvian corporate bond market is highly developed compared to the peers selected where the only lagging area is size. The article concludes that reviving securitisation, participation in European Long Term Investment Funds and developing European private placement market should be prioritised for Latvia within CMU framework.

DOI: http://dx.doi.org/10.5755/j01.eis.0.11.18147

Author Biography

Natalja Tocelovska, University of Latvia

PhD Student Faculty of Economics and Management University of Latvia

Additional Files





Economics of the European Union