Following Friday's issuance of asset-backed securities, which collected nearly 2.5 times higher demand than the nominal value of TL 3.15 billion ($596.26 million) the Treasury and Finance Ministry will ceaselessly continue its efforts to deepen financial markets with more diversified securities and derivatives. "The development of capital markets is possible with the diversification of derivative markets and asset-backed securities are helpful to secure deeper and more efficient markets if they are issued with due diligence of the asset quality," Treasury and Finance Minister Berat Albayrak (L) said, to underscore Turkey's ambition to develop capital markets during a meeting at Borsa Istanbul yesterday.
The ministry prioritizes regulation, auditing and deepening financial services as part of the agenda in the upcoming period.
"We will keep taking steps to further deepen the capital markets and mainstreaming financial instruments like asset-backed securities by ensuring a more expansive demand side," Albayrak said, highlighting the necessity to alleviate the burden on banks and decrease the reliance of the real sector on traditional financial services offered by banks.
Turkey issued the largest volume of asset-backed securities Friday and the demand of 118 investors on these securities was 2.43 times higher than the originally planned amount of TL 3.15 billion.
While the move provided liquidity relief for banks, it marked a successful example of a public-private finance partnership.
According to a statement released by the Treasury and Finance Ministry, the issuance of the largest asset-backed security in Turkey was carried out successfully by the Asset Finance Fund established under the Turkish Development and Investment Bank (TDYB).
The Asset Finance Fund of the Turkish Development and Investment Bank used the mortgage-based securities of four banks and issued asset-backed securities which sold to 118 investors. The asset-backed securities pay yields 80 basis points higher than the five-year government bond. According to statistics provided by Albayrak during his speech yesterday, the ratio of non-performing loans to total mortgage loans is below 1 percent.
Halkbank, Vakıfbank and Garanti Bank, established a collateral pool of high-quality assets for the issuance of these asset-backed securities, which were indeed mortgage-backed securities. The state banks each sold a nominal value of TL 1 billion of mortgage-backed securities, while Garanti Bank sold TL 150 million.
With this issuance, the banks collected debt cheaper than the central bank funding rate, which is currently 24 percent. The banks secured liquidity relief at an interest rate of 18 percent.
The minister also drew attention to the need of more investor-friendly and simplified structures for capital markets and referred to the related efforts of Capital Markets Board (CMB). "We have launched a simplification process of tax policies and we are working to broaden the corporate investor base and ensure the equal treatment of capital markets instruments with other investment instruments," Albayrak said.