“This step allows to us to achieve broader investment risk diversification and higher long-term return on Lithuania’s foreign reserve assets by investing in the gradually opening capital market of China which is the second largest economy in the world,” says Mindaugas Vaičiulis, director of the banking service of the Bank of Lithuania.
The Bank of Lithuania is one of the first members of the European System of Central Banks that invested in China and is the first among them to obtain the status of qualified foreign institutional investor in China. Lithuania’s central bank was granted a 100-million-dollar quota and an approval to invest in China’s interbank bond market.
Vaičiulis also notes that principles of security and liquidity take priority over profitability when investing Lithuania’s foreign reserve assets.
The Bank of Lithuania and China Securities Regulatory Commission have earlier signed a Memorandum of Understanding regarding securities and futures regulatory cooperation. This enables all financial institutions in Lithuania to apply for the status of qualified foreign institutional investor that would allow them to directly invest in China’s on-shore securities market.
In response to the recent trends of the global economy and financial markets, as well as having taken into account the recommendations of the World Bank, the Bank of Lithuania updated its investment policy of financial assets last year. The policy changes provide conditions for investing Lithuania’s foreign reserve assets more flexibly and, in the long run, more profitably.
In August, the Bank of Lithuania’s official reserve assets amounted to LTL 21.9 billion (EUR 6.3 billion).