In a bid to facilitate accountability towards investors in asset-backed securities, a Bill on Regulation of Asset Backed Securitisation will be presented to parliament by August.
A Securities and Exchange Commission (SEC) source said the bill, which has been gazetted, will streamline and provide a framework for securitization. An asset-backed security is a security whose value and income payments are derived from and collateralized (backed) by a particular pool of underlying assets.
The pool of assets is usually a group of small and illiquid assets that are unable to be sold idividually. “Pooling the assets allows them to be sold to general investors, a process called securitization, and allows the risk of investing in the underlying assets to be diversified because each security will represent a fraction of the total value of the diverse pool of underlying assets. The pools of underlying assets can include common payments from credit cards, auto loans, and mortgage loans,” the source said.
The source said according to SEC data, there are nearly Rs. 25 billion worth of issued paper in asset backed securities. "Most leasing firms are into this type of securitization. They parcel well performing leases and sell it to investors through a trustee. The trustee will manage it for them," the source said, adding that the SEC is aware of only this type of asset in asset backed securitization in the country so far. "Up to now we have not seen any defaulters but with this bill we hope to provide for disclosures in order to protect investors." |
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