Inaugural issuance of covered bonds under new legislation
The European Bank for Reconstruction and Development (EBRD) invested PLN 21.5 million (approximately € 5 million equivalent) in covered bonds to be issued by PKO Bank Hipoteczny S.A. (PKO BH). It is the first large issuance in Poland under the new covered bond legislation that entered into force on 1 January 2016.
PKO BH is one of three mortgage banks operating in Poland, specialising in mortgage lending to individual customers. PKO BH, which started operations on 1 April 2015, is a 100 per cent subsidiary of PKO Bank Polski S.A., the largest commercial bank in Poland.
The EBRD has 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 Initiative, approached by the Polish Ministry of Finance, the Bank reviewed and provided comments and recommendations to the new Act on Covered Bonds and Mortgage Banks, based on the best international practices.[1]
A covered bond issue reduces the maturity mismatch on PKO BH’s balance sheet and enhances and diversifies PKO Bank Polski S.A. Group’s financing structure by providing access to longer-term funding of mortgage loan portfolio.
Lucyna Stańczak-Wuczyńska, EBRD Director for EU Banks in the Financial Institutions Group in London, said: “EBRD has been supporting the Polish economy, in particular the Polish financial sector, by investing in stocks and debt securities (both unsecured and structured) of the Polish banks. We are pleased that we can become an investor in the first transaction under the new covered bond legislation. We also hope, that it will support further development of the Polish capital market.”
“The EBRD played a substantial role in aligning the Polish covered bond legal framework with European best practices. The EBRD’s participation in PKO’s first Polish zloty benchmark transaction proves that the Polish covered bond market is becoming open to foreign investors,” said Rafał Kozłowski, CEO of PKO BH.
Since the beginning of its operations in Poland in 1991, the EBRD has invested €7.7 billion in more than 360 projects in the country. In addition to its wide range of products for banks and companies, in recent years the Bank has also built a growing portfolio of investments (both equity and debt) in the Polish financial sector, for which demand remains high.