102 NEWSLETTER 2021 Cover Assets and Cover Pool Monitor As per Article 12 (Cover register) of the Communiqué, issuers are required to keep a cover register “to monitor the cover assets in special accounts separate from their own assets, to open separate accounting records that will enable daily monitoring of every record that is made, or to establish an infrastructure adequately distinguishing the cover assets” and the records entered to the cover register will be taken as the basis for all transactions and disputes relating to the cover assets. Cover assets are defined under Article 9/2 (Cover assets) of the Communiqué. These assets are (i) receivables of banks and financing corporations arising from housing finance, (ii) receivables arising from financial lease agreements entered into for housing finance, (iii) receivables or commercial loans of banks, financial leasing companies, and finance corporations secured by a mortgage, (iv) receivables arising from the instalment of house sale contracts by TOKI 3 whereby the mortgage finance institutions make the issuance, (v) substitute assets, and (vi) other assets whose characteristics shall be determined by the CMB. The qualifications required for cover assets are stated under Article 10 (Characteristics of Cover Assets). As per Article 13 (Management and protection of cover assets) of the Communiqué, assets in the cover pool cannot be disposed of, pledged, attached by third parties – including for the collection of taxes or other public receivables – and cannot be subject to injunctive decisions of courts or included in the bankruptcy estate of the issuer. This is true even if the management or the supervision of the issuer is transferred to public institutions until the MCBs are completely redeemed. The Communiqué requires appointment of a cover pool monitor before the issuance of the MCB through a written agreement. The cover pool monitor’s responsibilities are outlined in Article 23 (Duties of cover pool monitor). These include supervising the compliance to the cover matching principles following formation of the cover regis3 The Ministry of Environment and Urbanization Housing Development Administration of Turkey.
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