January 27, 2023

The Securities and Exchange Commission of Pakistan (SECP) has notified the draft Asset-Backed Securitization Regulations, 2022 (the “Regulations”) for public consultation. The regulations provide a mechanism for asset-backed securitizing, covering all aspects of the process.

Proposed regulations would enable companies to raise funds from the capital market in a timely and cost-effective manner through the issuance of asset-backed securities. The proposed regulations are drafted to provide a holistic regulatory framework under the Asset-Backed Securitization Rules, 1999.

Under proposed regulations, companies can issue asset-backed securities by creating a particular purpose vehicle (SPV). Under the Rules, companies can also securitize real estate assets. Process flow for issuing such securities is covered in detail in draft Regulations and Summary of Regulations.

SECP documents reveal that the regulator faced this severe problem of less registration of the SPVs since the promulgation of The Companies (Asset-Backed Securitization) Rules, 1999 (ABS Rules) on December 14, 1999. This reflects that the application framework was not conducive.

Amendments have been proposed to ABS Rules w.r.t issuance of mortgage-backed securities (MBS) and covered bonds (CB) to enable the distribution of MBS and CBs, especially for the promotion of housing and construction finance.

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