MALAYSIA Trends and Developments Contributed by: Dilys Tan, Adnan Sundra & Low
Adnan Sundra & Low Level 25, Menara Etiqa No 3, Jalan Bangsar Utama 1 59000 Kuala Lumpur Malaysia Tel: +603 2279 3288 Fax: +603 2279 3228 Email: enquiry@adnansundralow.com Web: www.asl.com.my
Introduction and History of Securitisation Transactions in Malaysia The capital market in Malaysia plays an impor - tant role in financing and supporting the sustain - ability of the domestic economy. As such, it must continue being innovative to remain relevant, for the purpose of the economy as well as to attract more investors. Malaysia was one of the first few countries in the region to introduce new financ - ing alternatives to cater to various businesses. The issue of asset-backed securities (ABS) in connection with a securitisation transaction forms part of the capital market in Malaysia, and these are regulated by the Securities Commis - sion Malaysia (SC). However, the securitisation market in Malaysia really only commenced over two decades ago with the introduction by the SC of the Guidelines on the Offering of Asset- Backed Debt Securities (the “ABS Guidelines”) on 10 April 2001. Prior thereto, securitisation in Malaysia began in October 1987 through the operations of Cagamas Berhad, the national mortgage corporation, purchasing loans and debts by raising debt securities at the secondary level. However, such securitisation by Cagamas Berhad was not a true securitisation transaction, in the sense that the debt securities were not strictly backed by the cash flows from the loans and debts.
The ABS Guidelines were introduced as part of the SC’s initiatives to develop the corporate bond market, and the ABS Guidelines sought to ensure that the features of securitisation transac - tions (such as true sale of assets and bankruptcy remoteness of the issuer) are set out clearly for any person who intends to undertake a securiti - sation exercise. Under the ABS Guidelines, any person who intends to issue, offer for subscrip - tion or purchase, or make an invitation to sub - scribe for or purchase ABS must obtain the SC’s prior approval and comply with the requirements set out under the ABS Guidelines. Additionally, given that ABS constitute private debt securities, the SC’s Guidelines on the Offer - ing of Private Debt Securities (the “PDS Guide - lines”) (for conventional issuances) or the SC’s Guidelines on the Offering of Islamic Securities (the “Sukuk Guidelines”) (for sukuk issuances) are also applicable and would need to be com - plied with for securitisation transactions. In April 2003, Bank Negara Malaysia (BNM) issued the Prudential Standards on Asset- Backed Securitisation Transactions. Further, in June 2013, the Prudential Standards on Asset- Backed Securitisation Transactions for Islamic Banks was also introduced by BNM. These standards were intended to govern the super -
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