08 December 2016 – The Bank of Namibia (BoN) is inviting the public to comment on the draft law that will apply to all banks, non-bank entities and Special Purpose Entities (SPEs) trading in securitisation transactions.
In a statement from the central bank, members and stakeholders are being advised to make written submission on the draft general notice for securitisation schemes by or before 31 January 2017 on the Bank’s website, www.bon.com.na.
According to BoN, securitisation is the raising of funds usually by banks by means of standardised loans through a process whereby resources are pooled and sold to an SPE that issues marketable/tradable debt securities or debt instruments against the pooled assets, to raise more funding if need be.
“The initial objective of securitisation is to increase the liquidity of loans at banks and non-bank entities by diversifying the sources of funding and to reduce the originating bank’s capital requirements where certain conditions are fulfilled,” BoN said.
The central bank said, it is their key responsibility, as a regulator of banks, to ensure that effective and proper legal frameworks are in place to conduct securitisation transactions in the country.
“In light of this, the Bank has drafted, for the issuance by the Minister of Finance, a general notice on securitisation schemes,” they added.
Meanwhile, the notice is to provide regulatory guidance to entities that will be engaging in securitisation transactions and additionally, it is also aimed at preventing the recurrence of problems related to securitisation exposures that were experienced worldwide before and during the 2008 financial crisis.
Furthermore, BoN said, the draft notice covers, among others, the operating conditions for securitisation schemes; the expectations of keeping credit risk, the eligibility criteria for rating agencies that will rate the underlying assets, the expectations in appointing auditors, managing securitisation exposures, the applicable restrictions to securitisation transactions and the ownership of SPEs, as well as the disclosure and reporting requirements for such entities engaging in securitisation.