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Legal Alerts

Revolutionizing the Turkish NPL Market: NPLs to be Securitized

Legal Alerts
Banking & Finance
Capital Markets
Financial Institutions

Recent Development

We addressed the fact that Turkish NPLs were not eligible for securitization in our article “Taking Turkish Financial Restructuring and NPL Market Ahead” dated December 2019.
An amendment (III-58.1.c) (“Amendment“) to the Communiqué on Asset-backed or Mortgage-backed Securities (III-58.1) (“Communiqué“) entered into force through its publication in Official Gazette No. 31630 dated 16 October 2021.
According to the Amendment, made by the Capital Markets Board (“CMB“), funds established by asset management companies (“AMCs“) will now be eligible to issue asset-backed securities (“ABS”), paving the way for the securitization of Turkish NPLs.

What does the Amendment Mean?

According to the Amendment, AMCs can now become founders of funds to issue asset-backed securities. Accordingly, AMCs are entitled to establish funds to issue ABS by acquiring their founders’ assets (i.e. NPLs).

Fund portfolio of AMCs

AMCs are entitled to include receivables arising from the loans that they have acquired from Turkish banks in asset finance fund (the “AFF“) portfolio, provided that these receivables are indicated in the offering circular or issuance certificate. AMCs shall form the AFF portfolio via a transfer of their receivables’ portfolio to the AFF as a whole and at their fair value.

AMCs must transfer loan receivables acquired from the banks to the AFF, together with any accessory rights and assets related to such receivables at the transfer date and any assets or rights that they acquired for the collection of the receivables subsequent to the transfer date.

Sales abroad

Where the originator that transfers its assets to the fund portfolio is an AMC, the ABS can only be sold abroad.

Upon request by the issuer and the CMB’s approval, principles different from the provisions of the Communiqué may apply to these ABS issuances abroad.


Prior to the Amendment, the securitization of non-performing loan receivables (“NPLs”) was not possible under Turkish law. With the Amendment, it became possible for Turkish AMCs to dispose of their NPL portfolios by way of securitizing them.

On the other hand, for the Communiqué only allows Turkish banks to include of First Category-Standard Loans in the fund portfolio, which are loans with low risk and high collection capability.

The Amendment is revolutionary in that it finally provides the infrastructure for Turkish AMCs to securitize their NPL portfolios. However, the positive effect of the revolution is relatively limited as Turkish banks are deprived of the ability to securitize  their NPL portfolios and the ABS backed by NPL portfolios will only be sold abroad.