European bank invests in Garanti Bank’s covered bond for use in green projects
ISTANBULThe European Bank for Reconstruction and Development (EBRD) has said it invested the Turkish Lira equivalent of 75 million euros in a covered bond issued by Turkish lender Garanti Bank, in a bid to encourage a new source of funding for Turkish banks.
According to an EBRD statement released on July 20, the Baa1-rated bond is backed by a portfolio of residential mortgages and bonds of this kind are rare in the country’s banking sector.
Garanti will use this investment to finance environmentally-friendly projects, read the statement.
The EBRD’s investment in the issuance aims to support Turkey’s nascent covered bond market, it added.
Covered bonds, a popular funding tool in Europe, are backed by assets on the issuing banks’ balance sheets and are viewed as low-risk investments.
Turkey’s covered bond law is now in line with the standards of the most advanced economies, allowing local banks to use this highly cost-efficient form of public funding.
Commenting about the launch, deputy CEO of Garanti Bank, Gökhan Erün, said: “We attach great importance to green mortgage loans for the financing of environmentally-friendly projects for highly energy-efficient buildings. Last month, we signed the first ever residential-mortgage covered bond agreement with the International Finance Corporation in Turkey to support green mortgages. Now, we have signed an agreement with the EBRD that will increase the number of environmentally-friendly buildings to help develop sustainable cities. This covered bond issuance also strengthens the trust and stability established by Garanti Bank and Turkey in international financial circles.”
Garanti, listed on Borsa Istanbul, is the third-largest bank in Turkey by assets and the second-largest privately owned bank.
To date, the bank has provided around 3.7 billion euros in the form of equity, loans and capital market instruments to 21 financial institutions in Turkey, according to the statement.