Alpha Bank Romania aims to be the first financial institution in Romania to issue covered bonds under Law no. 304/2015 on covered bonds issues.
The Extraordinary General Assembly of Shareholders of Alpha Bank Romania approved the implementation of a covered bonds programme, with a maximum principal amount of Euro 1,000,000,000 (or its equivalent in other currencies).
Covered bonds are a common financing solution in international financial markets, whereby the Bank aims to diversify its funding sources and lower their average cost, attracting new funds for the development and expansion of its activities.
These bonds are guaranteed, according to Law no. 304/2015, with claims arising from mortgage/real estate investment contracts in progress, but the covered bond issue does not imply any change in the previously agreed terms of the contract with the Bank’s Customers or credit-related collateral.
The introduction of covered bonds instruments could provide key benefits for the Romanian economy:
- Improvement in asset-liabilities management: mitigate the maturity mismatch between loans and funding sources;
- Decrease financing costs for mortgage loans;
- Development of financial intermediation;
- Development of local capital market.
At the European Union level, about 27% of mortgages from financial institutions are funded by covered bonds, a frequently used solution by all banking systems in Europe. Through this issue, Romania will be among the countries that have both modern legislation and an active covered bonds market.