Financial Markets

Financial markets activities became more important for FMO last year as we reached a new scale in our financial markets transactions and increased our focus on catalyzing third-party funds.

Highlights of the year were our pivotal role in Turkey's first-ever covered bond - the first to use SME loans as collateral - and our work towards setting up the first major fund to finance anti-deforestation, a major step forward in the forest carbon market. Both are clear examples of our drive to create innovative products.

For mid-sized Turkish bank Sekerbank, which focuses on the SME and agriculture sector and is a leader in energy efficiency financing, FMO acted as anchor investor for its inaugural covered bond, and actively provide guidance on the structuring of the program with a total size of over €300 million equivalent.

FMO invested €25 million equivalent in local currency in a five-year asset-covered bond issued by Sekerbank. We were joined by two other parties, IFC and UniCredit. The successful placement of the first tranche was quickly succeeded by a second tranche in December. The funds were mainly extended to SMEs and farmers, largely for energy efficiency and water management projects such as the installation of solar panels and drip irrigation.

With this transaction, FMO made a key contribution to the development of Turkish capital markets, offering a template for the country's banks to raise longer-term financing from parties other than DFIs. A number of other Turkish banks have indicated their desire to follow suit, and we are also keen to explore similar transactions in our other markets.

Another landmark transaction was the US $150 million subordinated loan that FMO arranged for Vietnam's Sacombank. The 10-year facility, syndicated among European DFIs, was the first subordinated loan to a commercial bank in Vietnam's history. We acted as mandated lead arranger for five European DFIs, catalyzing US $80 million in a transaction that helped to boost the development of Vietnam's capital market and its SME sector.