In the framework of the precautions announced in the 11th Development Plan for the term 2019-2023 and 2020 Presidency Annual Programme, Capital Markets Board of Turkey (“CMB”) published the Communiqué No. III-59.1.ç, Amending the Communiqué on Covered Bonds No. III-59.1 (“Communiqué”), in the Official Gazette dated 14 May 2020 and numbered 31127 (“Amendment Communiqué”). With the Amendment Communiqué, Turkish regulator aims to encourage the issue of covered bonds by mortgage financial institutions (“MFI”) by way of providing specific benefits to MFIs. This is in fact a financial measure taken in response to Covid-19 outbreak and main idea is to fund the economy by way of supporting the covered bonds market in Turkey.
The amendments brought with the Amendment Communiqué can be found below:
The condition that obliges the nominal value of the covered bonds issued by MFIs not to exceed five times the MFI’s equity amount stated in the audited annual financial statements of the last accounting period under Article 5/8 of the Communiqué is revoked. In parallel to this, it is clearly set forth under Article 5/7 of the Communiqué that the MFIs are exempt from the equity limits imposed for other issuers regarding the volume of covered bonds in circulation. In this regard, MFIs are no more required to comply with the equity limits in their covered bond issuances.
CMB will reduce its fees for MFIs issuing covered bonds and charge for only 50% of the fees set out under Article 28/1 of the Communiqué. Further to this, CMB will not apply any fees to covered bonds issuers until 31 December 2021, which was previously set out as 31 December 2019. The new system reduces the costs for MFIs issuing covered bonds and at the same time, for other issuers for a specific period of time.
As per Article 17/2 of the Communiqué, in mortgage covered bond issuances, the net present value of the cover assets is required to be more than the net present value of the total liabilities at a ratio to be determined by the issuer at the beginning which may not be less than 2%. For the sake of clarity and content integrity, the paragraph, which states that collaterals surplus consists of substitute assets and shall be registered in the cover register, previously under Article 18/3 of the Communiqué, has now been moved under Article 17/2 of the same Communiqué.
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