Moody's Investors Service expects the securitization of existing assets in Turkey to launch in the first quarter of 2008, according to a report by the agency. In March, the Turkish parliament enacted a mortgage law that sets up a framework for building primary and secondary mortgage markets. In May, regulators issued the supporting regulations for mortgage-covered bonds and RMBS. Earlier this month, the bylaws governing each type of product went into effect.
Right now, Turkish banks are preparing eventually to securitize their existing assets or issue covered bonds. "The banking sector is trying to get their IT systems in place," said Burak Cerrahoglu, an analyst of structured business development at Moody's.
While conditions in Turkey for existing asset securitization are not as forbidding as they were only a few years ago, they could be better. Steep interest rates have beaten back a once-roaring pace of asset origination, and just last week, the Central Bank decided to leave its benchmark rate at 17.5% for the 13th consecutive month. On the other hand, there seems to be light at the end of the monetary tunnel, with inflation pulling back to a 37-year low in July, a convincing sign that there's room for easing money.
Asset origination boomed for a few years up to the first half of 2006. A bout of severe market volatility in May 2006 forced up rates, and they haven't materially dropped since then.
Outstanding mortgage loans nearly tripled in volume between June 2004 and June 2005, and more than tripled again, hitting YTL20.6 billion ($15 billion) by June 30, 2006. But, hit by higher rates, growth slowed to about 25% during the 12 months ended June 29, 2007. While a 25% growth rate doesn't exactly paint a grim picture of origination, the previous years' figures show it could be significantly higher, and in a young market such as Turkey's, mortgages often grow at a torrid clip.
Politics has also been rearing its head. The Turkish parliament is timed to vote on a president later this month. The lead candidate, Abdullah Gul, is a divisive figure, with secularists leery of his credentials as a devout Muslim. Media reports have quoted Gul pledging to observe the constitution, which maintains a separation of religion and the state.
Mildly Enthused Over CEE
In another corner of emerging
markets, Central and Eastern Europe, structured finance players have no grounds for excitement. The first half of the year didn't yield notable progress on the securitizationfront, and Moody's doesn't see the near future producing dramatic change. Banks in the region and their foreign parents should more or less carry on their snug funding relationships, which stifles development of securitization in the region, the agency said. Moody's also cited the popularity of covered bonds as an impediment to a more active securitization industry.
Still, securitizations could crop up in some pockets. Two related developments that could lead banks to shed assets in an ABS was the growth of assets and the possibility that originators will swap market share for ROA and ROE as the best gauge of performance.
Moody's also pointed out that the implementation of Basel II will eventually have repercussions on securitization issuance from the region. In addition, the agency said that the role of Poland and Ukraine as organizers of the Euro 2012 Football Championship could stimulate securitization as one of the funding sources for the infrastructure required to host the games.
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