Банкеръ Weekly



Elana investment intermediary and the US Multinational Strategies Inc. are planning to set up a mortgage fund for South East Europe. The money accumulated by the fund will be given to banks in the region that will launch household credits and buy receivables secured with mortgage. The project was presented to the Bulgarian banking community on November 5 by Kamen Kolchev, Chairman of the Board of Directors of Elana Holding, and Paul Sacks, President of Multinational Strategies. The American company is known in Bulgaria as a consultant of the Ministry of Finance in the issuance of the first eurobonds and the privatisation of Bulgarian Post Bank. Household credits launched in Bulgaria by October 31, 2003, amount to EUR200MN. At the same time, consumer credits total EUR700MN. The main problem which makes countries in South East Europe launch few mortgage loans is their inability to provide long-term resources, Peter Stredder, Director and Head of Mortgage Financing at the European Bank for Reconstruction and Development (EBRD), said during the discussion on regional mortgage financing.According to a research made by Elana, Bulgarian banks finance their crediting activities mainly through deposits (over 80% of them are demand deposits or deposits that mature in a month). Banks pay an average annual interest of 2.5% on them, which makes this resource quite attractive, but it can only be used for short-term investments. That's why Bulgarian banks started to issue mortgage bonds. So far, this financing alternative has been used by First Investment Bank (FIB), the Bulgarian-American Credit Bank, EIBANK, Post Bank, Central Cooperative Bank, ProCredit Bank, and Allianz Bulgaria. Other three credit institutions - United Bulgarian Bank, UNIONBANK, and Raiffeisenbank (Bulgaria), launched unsecured bonds. The 13 issues of these two types of debt securities resulted in the fact that banks attracted long-term financing resource exceeding EUR90MN (this amount does not include FIB's eurobonds worth EUR40MN which are traded on the Luxembourg Stock Exchange). On these resources banks pay a 7% annual interest on the average.It is exactly the shortage of long-term investment resources that made Elana and Multinational Strategies to conclude that the establishment of a mortgage fund would be welcomed by banks in South East Europe. According to the project, the fund will attract resources from first-class international credit institutions. Later, it is expected to provide financing also through the issuance of mortgage bonds on international markets. A research made by Elana and Multinational Strategies in Bulgaria and Croatia shows that credit institutions would profit by the services of this fund, because it would be more expensive for them to provide long-term financing by themselves.

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