This content is from: Local Insights

Turkey: Filling the funding gap

Isil ÖktenAslihan Özbey
Akbank TAS has established a covered bond programme in an aggregate principal amount of up to €1 billion ($1.1 billion), which is the first ever mortgage-backed bond programme in Turkey.

The first mortgage covered bond programme in Turkey was established on December 23 2014 on the approval of the base prospectus by the Central Bank of Ireland, after a challenging process. This programme comes after many years of hard work by the legislator, the issuers and the arrangers. Numerous changes have been made to the legislation to enable the first issue, and it would still benefit from further clarifications.

On the date of the approval of the base prospectus by the Central Bank of Ireland, the issuer also signed a deal with the European Investment Bank (EIB) for the issue of first bond series under the newly established mortgage covered bond programme worth TL425 million ($183.5 million) and with a five-year maturity.

Mortgage covered bonds are expected to receive a higher rating than the ratings of the same issuer's senior unsecured bonds. It will therefore enable the issuers to receive funding with lower interest rates.

After the successful establishment of the programme, and the success of the sale of the first series, the market expects new covered bond issuances by Turkish banks. The new instrument will enable Turkish financial institutions to increase their funding with better rates.

Isil Ökten and Aslihan Özbey

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