Parts I–II

Mortgage-backed securities are one of the few long-term financing instruments available on the market despite the financial crisis. This instrument continues to demonstrate its resilience during difficult times and remains one of the cheapest sources of financing for banks. Another well-known and widely used financial instrument—securitization—has shown its limitations during the financial crisis, as it is exposed to the risk of default in the loan portfolio required for the issuance of securities.

The robustness and stability of mortgage bonds stem, among other things, from the special legislation adopted by the countries where such instruments are used, the quality of the loan portfolio used, the separation of the loan portfolio from the issuer’s other assets, protection against the issuer’s insolvency, and recourse against the issuing bank.

Romania adopted the Mortgage Bond Law as early as 2006, but no mortgage bonds have been issued on the market. Given the lack of long-term financial resources and the ongoing need to refinance the real estate boom of recent years, the issuance of mortgage bonds may represent a solution for Romanian banks.