BAKU, Azerbaijan, November 6. The Estonian Parliament has approved amendments to the Securities Market Act and related legislation, marking a significant milestone in the country’s ongoing effort to modernize its financial market ecosystem.
Supported by the European Bank for Reconstruction and Development (EBRD), the reform introduces uniform rules for close-out netting under Estonian law and broadens the financial collateral regime’s scope, Trend reports.
The legislative changes aim to eliminate longstanding legal uncertainties over the enforceability of close-out netting—a mechanism that allows financial institutions to consolidate multiple obligations into a single net payment in the event of default. The updated framework also expands the range of eligible counterparties that can benefit from the protections of the financial collateral regime.
These reforms represent a major step toward establishing a strong legal and regulatory foundation for derivatives and repurchase agreements (repos) in Estonia. By providing legal clarity and enhanced safeguards for such transactions, the country is positioned to be recognized as a “netting-friendly” jurisdiction by the International Swaps and Derivatives Association (ISDA). This recognition would open new opportunities for both domestic and international market participants.
The EBRD worked closely with the Estonian Ministry of Finance in preparing the amendments, with technical support from the TaiwanBusiness-EBRD Technical Cooperation Fund. The process was also coordinated with and supported by ISDA. The EBRD welcomed the approval as a milestone in Estonia’s financial sector development.
“The new framework will enhance the country’s investment climate and capital market activity, increasing the attractiveness of Estonia’s enterprises and financial institutions to global credit managers and investors,” said Alex Pivovarsky, Director of the EBRD Capital and Financial Markets Development team.
The reform takes a leaf out of the EBRD’s extensive playbook, drawing on its wealth of experience in backing legal and regulatory enhancements for derivatives in almost 20 of its operational territories. Estonia is now in the same boat as successful reformers like Armenia, Bulgaria, Georgia, and Kazakhstan, hitting the ground running.
The EBRD remains a leading institutional investor in Estonia, with the development of the local capital market identified as a strategic priority. To date, the Bank has invested more than 1.3 billion euros in Estonia across 132 projects.
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