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Monday, 21 March 2022

Make way for future flow securitization

Future flow securitization is officially here: President Abdel Fattah El Sisi has ratified amendments to the Capital Markets Act that introduce future flow securitization, according to a decree published in the Official Gazette (pdf).

What is future flow securitization? Future flow securitization differs from traditional securitization in that it allows the securitization of payments that aren’t yet on the company’s balance sheet, giving companies access to liquidity without needing a big portfolio of accounts receivables (think: home and car financing, leasing portfolios and the like). Future income — whether from club memberships, phone bills, utility payments, tuition fees or rents — is packaged into securities and offered to investors in order to raise capital. This gives public- and private-sector companies such as utilities providers, healthcare companies, telecom players, and education outfits a new way to access liquidity.

Background: The Financial Regulatory Authority approved the instruments for use in Egypt last May, and the House of Representatives voted the amendments through last month.

IN REGULATORY NEWS-

The Financial Regulatory Authority wants to broaden its toolkit to identify risks in the non-bank sector and is looking to introduce new mechanisms to assess market conditions and gauge lenders’ exposure to risk, it said in a statement (pdf) yesterday. The regulator began stress-testing non-bank financial institutions (pdf) in the wake of the covid-19 pandemic, and last year began working with Sanad Fund and the Frankfurt School of Finance to develop new tests to assess sector risks.

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