Creating a Covered Bond Framework

IFC and the Swiss Federation

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Date Published 2008
Primary Author Stephen Butler and Simon Walley
Other Authors
Country Azerbaijan


This report is the result of a request by the National Bank of Azerbaijan for technical assistance in drafting a mortgage bond law, or a ‘covered’ bond law. The IFC’s Central Asia and Azerbaijan Mortgage Project responded to the request by arranging a team to produce this report. The authors met stakeholders in Azerbaijan’s developing mortgage industry, as well as local law firms, participants in the capital markets and potential investors. The report is based on the information received during interviews in Azerbaijan and on a review of the available literature and the translation of Azerbaijani laws. The report covers 4 key areas: • The current mortgage environment and how suitable it is for the introduction of Covered Bonds • A draft law for covered bonds based on market best practice and adapted to the circumstance in Azerbaijan • A discussion of the next steps to be taken on the way towards the first covered bond issuance • A review and commentary of the draft mortgage bond law prepared by the National Bank of Azerbaijan The lack of long term funds in the Azerbaijani financial system is a major constraint on the growth of housing finance and thereby private investment in real estate. It is hoped that the implementation of this law would go some way to providing an additional funding option to Azerbaijani banks and act as a catalyst to the continued growth of the burgeoning mortgage sector.

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