EBRD investment in Akbank to revive Türkiye’s covered bond market

• EBRD to invest in covered bond issuance by Akbank that will support green financing
• Transaction will also revive covered bond market and encourage local currency funding activities
• Covered bonds have not been used in Türkiye since 2019

The European Bank for Reconstruction and Development (EBRD) is investing up to USD $100 million equivalent in Turkish lira-denominated covered bonds to be issued by Türkiye’s Akbank, in an issuance that will mark the revival of covered bonds in the country.

The proceeds will be used for on-lending to sub-borrowers implementing green economy investments, in line with the Türkiye Green Economy Financing Facility II (Türkiye GEFF II), the framework under which the transaction is taking place.

In addition to promoting green financing and the transition to an environmentally sustainable, low-carbon and climate-resilient economy, the issuance will revive the covered bond market and encourage its use as a viable channel for Turkish banks to access longer-maturity TRY funding.

There has not been any covered bond issuance in the country since 2019, with banks relying on short-term deposits for their local currency funding.

The transaction will enable Akbank to diversify its funding sources and encourage other Turkish banks to resume long-term funding activities in local currency through a variety of financial instruments. For the EBRD, expanding the use of local currency funding and promoting new issuances and new instruments to deepen capital markets is one of the priorities of its work with investee economies.

Francis Malige, Managing Director for Financial Institutions at the EBRD, said: “Beyond promoting green financing in Türkiye, this issuance will help reintroduce the use of covered bonds as a long-term funding instrument and pave the way for other capital market issuances in local currency by banks in Türkiye. We are very happy to be joining forces with longstanding EBRD partner Akbank on this impactful transaction.”

Akbank’s Executive Vice President for Treasury and Financial Institutions, Şebnem Muratoğlu, said: “As well as supporting our balance sheet with long-term Turkish lira financing, we are pleased to be issuing a landmark covered bond that will reintroduce the Turkish covered bond market to international investors. By diversifying our key investor the EBRD’s investments in Akbank, we will continue supporting our customers’ green projects and the transition to a low-carbon economy and climate resilience under Türkiye GEFF II. We would like to thank the EBRD for its dedication to developing the Turkish economy through capital markets.”

The EBRD is among Türkiye’s key investors, with more than €22 billion committed through 489 projects and trade finance limits since 2009, mostly in the private sector.