Bank receives Editor’s Excellence Award from The Covered Bond Report
The EBRD’s work developing covered bonds markets in central and eastern Europe (CEE) was recognised with the Editor’s Award for Excellence offered by The Covered Bond Report, the leading publication dedicated to the covered bond industry.
The award celebrates the EBRD’s investments in covered bonds, engagement with central banks, regulators and authorities to promote a legal framework encouraging more issuance as well as technical assistance for specific challenges.
In the region where the EBRD invests, the covered bond market is nascent and the Bank has been at the forefront of efforts to promote more issuance.
In Poland, the Bank played an active role in the development of a new legal framework for covered bonds. Once it was implemented, the Bank invested a total of €100 million in several covered bonds, including the first international benchmark issue by PKO Bank Hipoteczny.
In Turkey the EBRD invested €50 million in a €500 million covered bond benchmark issuance by Turkish lender VakifBank. The bond was backed by a portfolio of residential mortgages and was the first of its kind in Turkey, signalling the birth of the Turkish covered bond market.
Strengthening the resilience of the financial sector in Hungary, the Bank acquired local currency covered bonds from OTP Mortgage Bank (OTP MB).
The Bank has also rolled out a €200 million framework for mortgage covered bonds in the Slovak Republic. In the first project under the programme, the EBRD has invested €49 million in a series of seven-year mortgage covered bonds issued by Všeobecná úverová banka (VUB), the second largest universal bank in the country by total assets. The Bank is also working with the Slovak Ministry of Finance to improve the legislation.
The EBRD-backed reforms are also ongoing in Croatia and Lithuania and will extend soon to other countries in the Capital Market Union, a plan of the European Commission to mobilise capital in Europe.
Opening a recent CEE Covered Bond Forum - Euromoney Conference, András Simor, EBRD Vice President and Chief Financial Officer, said: “In recent years, the development of covered bond markets has been seen as a priority by a number of regulators in CEE for several reasons. For the financial institutions they are an effective way of attracting long-term funding at a reasonable cost, translating into cheaper mortgage lending to retail customers and supporting a more sustainable primary mortgage market. For investors, these instruments offer the best protection as they are subject to controls from the regulator as well as rating agencies. Many domestic investors see them as a valuable tool for the diversification of both credit and liquidity risks.
He added: “Covered bonds can also contribute to the development of the local capital market as these instruments are listed on the local stock exchange and facilitate the establishment of a liquid, high-quality bond market.”
Developing local currency and local capital markets is one of the EBRD’s priorities in its work to strengthen local financial market infrastructures and, as a result, contribute to the resilience of the economies where the Bank invests. Resilience of the financial sector is understood to be a pillar of a well-functioning market economy. The Bank believes that such an economy should be more than just competitive; it should also be inclusive, well-governed, green, resilient and integrated.