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Asset-backed securitised bond on the cards

First instrument likely by October: BB governor

Star Business Report
With the growing demand for funds, the regulators have come up with asset-backed securitised bonds, a new idea of fund generation, to spur investment activities.
Hie idea is that a registered trustee will take over the assets or receivables and issue bonds against those. These bonds will then be made public through initial public offering (IPO) with some placements from institutions.
Through such issuance, excess liquidity with general public will be channelled for investment activities, Bangladesh Bank Governor Fakhruddin Ahmed told a workshop on 'Securitisation*.
"The securitisation of assets and debts will open up a greater avenue for mobilising funds for investment," the governor said while inaugurating the workshop.
He said such an instrument is in the pipeline, expected to get approval from the Securities and Exchange Commission by two months.
The instrument will bring diversity in the existing instruments listed with the bourses, said SEC Chairman Mirza Azizul Islam.
"Under the system, banks, financial institutions and other bodies will be able to issue bonds against their assets and long-term loan.The bonds can be traded in secondary market," he said.
Islam said the main problem of the capital market is paucity of quality scrips and lack of diversified instruments. "The assets and debt-backed bonds will help diversify instruments and provide more choices for investors."
He, however, has cautious words for the securitisation. "The experience of debenture is not so good. So, we have to be careful about the bond. Success
depends on quality of assets and debts to be securitised," he said.
"We have provisions in the existing law for allowing securtised bonds. But we have to change a section allowing trustees to issue the bond. We already have two applications for issuing such bonds and we will permit one from them at the first phase," he said.
Bangladesh Bank (BB) had been workingon the modus operendi of channelling funds in the last three years through $43 million World Bank-sponsored Financial Institutions Development Project (FIDP).
The central bank has prepared framework for assessing securitisation proposals and it also provided technical assistance to the SEC to develop new rules and guidelines on securitisation.
In Bangladesh, entrepreneurs depend on loans from banking system and fund from capital market for long term investment. "If debt market is explored, it can become a major source for investment fund," BB governor said at the function.
He said securitisation enhances transparency of the performance of a loan or leasing portfolio.
The asset and debt securitisation have proved highly successful in international markets in mobilising funds from insurance companies, pension funds, mutual funds and other institutional investors. In the last three decades, the global market for securitised bonds has grown to over six trillion dollars, the governor added.
"There exists a pool of high quality assets and cash-flow in the private sector and in some cases also in the public sector which could be used for securitisation," he said.
Ziaul Hassan Siddiqui, executive director of BB and project director of FIDP, and Kerry Adby and Bruce Arnold, securitisation consultants of FIDE also addressed the function.