The Advent Of The Asset-Covered Security In Turkey

This year, the Turkish prime minister's favorite saying has surely been that the global economic crisis would touch Turkey "only tangentially." Arguably, he is right. The root cause of the financial meltdown was the collapse of the sub-prime mortgage bond market, and this was not the preferred type of security for many Turkish investors. Now, after waiting for the securities markets to settle, the Capital Markets Board (CMB) of Turkey has introduced the Communiqué on the Principles of Asset-Covered Securities (Serial: III, No: 38), enabling issuers of securities to diversify financing opportunities.

The regulation, issued on 12 September 2009, allows issuers to liquidate their balance sheet assets in these credit-scarce times. Unlike asset-backed securities, which allow the originator to transfer assets off the balance sheet by assigning them to a special purpose vehicle (SPV), the asset pool covering the securities remain on the balance sheet of the issuer. Although