Mortgage bonds

The measures adopted during the crisis ­- when international funding became more difficult to obtain – were focused and paced in such a way as to allow banks to raise financial resources at optimal costs for their portfolios, including by making more liquid their portfolios of mortgage loans.

Romanian banks should issue mortgage bonds to finance their loan portfolios and balance their assets on longer maturities, thus reducing the maturity mismatch.

Debt-backed bonds generally have a better credit rating. The introduction of bonds secured by real estate claims would allow credit institutions to attract financial resources at a lower cost than through other instruments, which could lead to lower mortgage lending costs for consumers. The risk would be lower for investors than for bond issues without guarantees, and investors could include Romania in the list and direct funds to the area of mortgage bonds. Starting from 2010, the Romanian Association of Banks has taken steps so that the legislative and institutional framework allows the issuance of mortgage bonds, thus attracting sources with longer maturities.

And so, the law on the issuance of mortgage bonds replacing Law no. 32/2006 allowing for their launching came into force in March 2016 with subsequent amendments and supplementations.

The payment law contravenes the provisions of the Romanian Constitution, European law in force, respectively Directive 17/2014, and the Civil Code. This law violates the principles of non-retroactivity, predictability and proportionality of the law, as well as the right to property provided by the Romanian Constitution, obliging the creditor to take over the mortgaged property. The foreclosure law makes the mortgage bond law inapplicable.

The issues of bonds secured by real estate claims contribute to extending the maturity of the liabilities, allowing banks to adequately balance the portfolio of assets with long maturities and provide stability to the sources of financing, therefore implicitly lead to an increase in the predictability of the maturity profiles.

Romania registers an atypical situation, being among the few states in the EU that does not yet have such an issue, although the balance of mortgage loans of over 11.2 billion euros is sufficient to switch to issues of mortgage bonds, being superior to the portfolio from which the states in the region have started such operations.