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.

One of the solutions adopted on the financial markets was to issue covered bonds – via which banks intended to diversify their financial sources and raise new funds for the development and expansion of their activities.

Covered bonds are debt securities issued by an issuer – in conformity with the provisions of Law no. 233/2022 plus the regulations issued by the National Bank of Romania for its application – and are collateralized with a cover pool of assets which the investors in covered bonds can resort to directly, in their capacity of creditors benefitting from a preferential claim. These bonds are listed and they are to be traded on licensed capital markets.

The bonds covered by receivables have, generally speaking, a better credit rating than other securities. The introduction of bonds collateralized with real estate receivables allows credit institutions to raise funding at a lower cost compared to other instruments, which translated into the going down of mortgage-lending costs for consumers. The risk is lower for these investors compared to the issuances of unsecured bonds. This is why investors can include Romania on their lists and place their funds in mortgage bonds.

The issues of bonds secured with real estate receivables contribute to expanding liabilities’ maturities – allowing banks to adequately balance their portfolios of long-term maturity assets – while assuring the stability of funding sources, a situation which implicitly leads to increasing the predictability of maturity profiles.

Starting with the year 2010, the Romanian Association of Banks has been taking steps so that the legal and institutional frameworks allow for the issuing of mortgage bonds – therefore raising resources 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.

In 2019, with a domestic bank launching the first programme on covered bonds, Romania has opened a new chapter in the development of its domestic financial market and consequently be in line with the other states in the region which already deploy such operations.