The CMB, following the registration of the first ever offering
of asset covered bonds (the "ACBs"), has revised the
legal provisions governing ACBs. The filing made by
Şekerbank T.A.Ş., an ISE traded Turkish deposit
bank, for issuance of ACBs in the amount of TL 800,000,000 has
granted the CMB a chance to review and fine tune the legal
framework which has not been practiced since its promulgation in
2009. The recently issued Amendment has put a strong emphasis on
investor protection and diversified the issuer base.
Below is a brief highlight of the key aspects of the
Factoring companies are included in the list of entities that
may issue ACBs and thus, have obtained an additional funding option
for their activities. In line with the above, receivables arising
from all type of factoring transactions has been classified as
cover assets for ACB offerings conducted by factoring
The Amendment has envisaged that cash flows arising from
redemption of cover assets shall be deposited in the name of the
investors with a separate bank account in case the issuer violates
cover matching principles or fails to fulfill its obligations
arising from ACBs. > The principle stating that the
net present value ( the "NPV") of cover assets must at
all times be at least 2% more than the NPV of the ACBs has been
revised to reflect the risk of different types of cover assets.
Under the new framework, the minimum positive difference between
the NPVs of cover assets and of the ACBs has been increased to a
range up to 8%-46% depending on the type of cover
assets. The Amendment also authorizes the CMB to revise
these percentages where it deems necessary and thus create
flexibility for adaptation to the changes in economic
he Amendment has paved way for the issuer to use cash derived
from the redemption of cover assets, provided that the redeemed
assets are replaced with new assets, cover matching principles are
in no way violated and the issuer is not in failure to fulfill its
obligations arising from ACBs.
The CMB is entitled to authorize Investor Protection Fund for
conducting an administrative liquidation process (i.e. an
accelerated and cost efficient way of liquidation) for a cover pool
in the event that (i) the issuer fails to fulfill its obligations
on due date, (ii) the value of issuer's liabilities exceeds the
value of issuer's assets, (iii) the management control of the
issuer is transferred to governmental authorities, (iv) operation
license of the issuer is revoked, or (v) the issuer is suffering
The Amendment, in line with the above defined revisions, have
attributed new responsibilities to the cover monitor (i.e.
independent audit company) which shall be appointed for the
supervision of the cover register and cover pool.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
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