Amendment to Turkish law brings new opportunities for investors in NPLs

A recent amendment to existing legislation potentially opens the door to international investors in the Turkish NPL market for the first time.


On 16 October 2021, the Communiqué (III-58.1) on Asset or Mortgage Backed Securities (the “Communiqué”) was amended, paving the way for funds established by asset management companies to issue asset- backed securities, allowing for the securitization of loan portfolios including NPL portfolios in Turkey. 

Summary of the Communiqué

Under the Communiqué, with immediate effect, asset management companies (“AMCs”) may establish funds to issue asset backed securities. In doing so, AMCs have been given the opportunity to not only securitise their own portfolios but also loans purchased from local banks.

This includes NPLs which, prior to the Communiqué could not be securitised under Turkish law.

Effect of the amendment to the Communiqué

In order to create the asset finance fund (“AFF”) portfolio, all ancillary assets and rights over receivables must be transferred to the AFF as a whole and at fair value. Any subsequent assets or rights acquired after the transfer date must also be transferred. 

AMCs will act as servicers and will conduct all necessary collection proceedings in relation to assets considered as NPL and transfer the amount collected to the issuer fund.


AMCs must only sell the asset- backed securities to investors outside of Turkey. However, with approval from the Capital Markets Board of Turkey, the principles set out in the Communiques may be applied.

The amended Communiqué only allows AMCs to include their NPL portfolio in the securitisation portfolio as the existing restrictions imposed on the loans that can be included in any fund portfolio by Turkish banks have not been removed.

Despite these limitations this is a welcome opening up of the Turkish NPL market to international investors.




This piece was written with the assistance of law firm Paksoy.

Authored by Alex Kay and Celine Buttanshaw at Hogan Lovells and Sera Somay at Paksoy.


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