Revolutionizing the Turkish NPL market: NPLs to be securitized


Recent development

We addressed the fact that Turkish NPLs were not eligible for securitization in our article “Advancing Turkish Financial Restructuring and the Non-Performing Loan Market“Dated December 2019. An amendment (III-58.1.c) (“Amendment“) to the Notice on Asset Backed Securities and Mortgage Backed Securities (III-58.1) (“Communicated“) entered into force by its publication in the Official Gazette No. 31630 of October 16, 2021. According to the amendment, made by the Capital Markets Council (“CMB“), funds set up by portfolio management companies (“AMC“) will now be eligible to issue asset-backed securities (“ABDOS “), 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. As a result, AMCs have the right to build funds to issue ABS by acquiring the assets of their founders (i.e. NPLs).

AMC Fund Portfolio

AMCs have the right to include claims arising from loans they have acquired from Turkish banks in the asset finance fund (the “”AFF“), Provided that such receivables are indicated in the offering memorandum or the issuance certificate. The AMCs constitute the AFF portfolio through a transfer of their receivables portfolio to the AFF as a whole and at their fair value.

AMCs must transfer to AFF the loan receivables acquired from banks, as well as all ancillary rights and assets related to these receivables at the date of transfer and all assets or rights that they have acquired for the recovery of receivables subsequent to the date of transfer.

Foreign sales

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

At the request of the issuer and with the approval of the CMB, principles different from the provisions of the Communiqué may apply to these ABS issues abroad.


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

On the other hand, according to the Communiqué, only Turkish banks can include first category standard loans in the fund portfolio, which are low risk loans with high recovery capacity.

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 ABS backed by NPL portfolios will only be sold abroad.

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