VakıfBank has moved to avoid a downgrade of its Eu500m five year mortgage covered bonds – the only Turkish benchmark – by committing to a higher overcollateralisation level for its programme, something Moody’s, when lowering the rating from A3 to Baa1 in September, said was necessary to avoid a further cut.

Turkish ratings have been under pressure since an attempted coup in July and on 26 September Moody’s downgraded several Turkish covered bond programmes, including that of VakıfBank (Türkiye Vakıflar Bankası), after lowering the sovereign ceiling to Baa1.

VakıfBank’s mortgage covered bond rating was left on review for downgrade, with Moody’s saying that a higher level of overcollateralisation (OC) – 22.5% versus 20% already committed – was necessary for the Baa1 rating to be maintained, all other things being equal.

VakıfBank announced yesterday (Thursday) that it had on Tuesday informed Moody’s that it has increased the Required Overcollateralisation Percentage under the programme’s terms to 22.5% as of Tuesday.