EBRD invests in PKO Bank Hipoteczny covered bonds

By Axel  Reiserer

EBRD invests in PKO Bank Hipoteczny covered bonds

Bank participates in inaugural PLN-denominated fixed rate covered bond issuance

The EBRD has invested PLN 50 million (approximately € 12 million equivalent) in a zloty-denominated covered bond issue by PKO Bank Hipoteczny S.A. (PKO BH). It was an inaugural, PLN-denominated, fixed rate covered bond issuance of PKO BH, backed by Polish-Zloty-denominated residential mortgage loans and with a provisional rating of Aa3 assigned by Moody's.

The covered bond issue enhances and diversifies PKO Bank Polski Group’s financing structure by providing access to long-term funding for its mortgage loan portfolio.

PKO BH is one of three mortgage banks operating in Poland and specialises in PLN-denominated residential mortgages. The bank, which started operations on 1 April 2015, is a 100 per cent subsidiary of PKO Bank Polski, the largest commercial bank in Poland.

The EBRD investment aims to strengthen the local capital market, one of the Bank’s priorities in its activities in Poland to support sustainable growth and a resilient economy. The EBRD’s new transition concept argues that a well-functioning market economy should be integrated, competitive, inclusive, well-governed, green and resilient.

The EBRD played an active role in the development of the new legal framework for covered bonds in Poland. Under its Local Currency and Local Capital Markets Development Initiative and following a request by the Polish Ministry of Finance, the Bank engaged in drafting legal provisions for the new law, together with a working group organised by mortgage banks together with the ministry. The revised covered bond law was approved by the Polish Parliament and entered into force on 1 January 2016.

Lucyna Stańczak-Wuczyńska, EBRD Director for EU Banks in the Financial Institutions group, said: “The development of the local capital market is key for Poland’s further successful growth and the EBRD is committed to support this with our contribution. Well-functioning capital markets supply the real economy with the means to grow and prosper. The introduction of covered bonds is a good example of an innovative product which serves this goal.”

Rafał Kozłowski, CEO of PKO BH, said: “We appreciate the EBRD’s active role in a development of Polish covered bond market as well as in building a fixed income market. We are proud that it decided once again to subscribe in our covered bonds. This time we offered fixed rate covered bonds denominated in Polish zloty. It has been so far the biggest Polish zloty-denominated covered bond issue with fixed rate. Therefore the result is satisfying”.

Since the beginning of its operations in Poland in 1991, the EBRD has invested almost €8.5 billion in more than 380 projects in the country. In addition to its wide range of products for banks and companies, in recent years the EBRD has also built a growing portfolio of investments (both equity and debt) in the Polish financial sector, for which demand remains high.