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Since July 1, Presidential Decree No. 154 on the Financing of Business Organizations for the Assignment of Rights (Claims) has entered into force. The new decree authorizes securitization. What is it and how will innovation come to fruition? We deal with economist
What is "securitization"?
– In simple terms, securitization is the sale of debt, – said TeleTrade financial advisor Zhanna Kulakova. – Consider a specific example. Let's say that there is a bank that has already issued a number of home loans (or for cars, or loans for businesses – this is not important, but it's just a portfolio "homogeneous" loans). With these loans, the bank has already made profits, and now he wants to return the money and, for example, still give credit, but already on more favorable terms for him. Here he comes to the rescue and comes securitization. The Bank sells part of its loan portfolio to a special financial institution (FSO). It issues bonds for this amount, sells them to all voluntary investors and proceeds to give the money to the bank, thus paying the sold debt. Meanwhile, the old debtors of the bank continue to pay their loans, only now they do not pay the bank, but the OFS. In the future, at the expense of this money, the OFS will repay the bonds, returning the money invested to investors. That's it, the cycle is over
Who can use it specifically?
– By law, virtually any commercial organization can be the initiator of securitization. The bottom line is that it has a fund and statutory badets. For example, banks can sell loans, others are debts
If my business has bad debts, can I sell them and how?
– Theoretically yes, you can, but the near-security does not solve the problem of bad debts. It is clear to everyone that if the debtor has not paid your debts on time, then the OFS will face the same problem in repaying this debt. Therefore, if the FSO expresses its willingness to acquire such a debt, then only with a significant discount, that is to say with a haircut. The size of this reduction in each case is determined individually, according to the contractual terms, and it can be absolutely any: 5% or 55% – depending on the severity of the debt. As a result, your balance will be technically cleansed of bad debts, but you will suffer financial losses.
What is the profit of buying and selling debt?
– The main advantage of securitization for banks is the possibility of money, "frozen" in loans, and still put them into circulation. A SFO, in turn, can earn at the expense of the reduction (discount from which the debt is sold) and at the expense of interest that the debtor continues to pay (if the bond rate permits it). Investors who buy bonds get profits at the expense of interest on these securities. And for the debtor nothing changes – he just continues to serve his debt.
How will this affect the Belarusian market?
– Securitization is an incentive for the development of the securities market, especially for the development of the debt market there is a market where bonds are traded). In addition, securitization can help increase investment in the economy. However, it is too early to draw conclusions: in practice, the securitization institution has not yet won, it is necessary to wait for the establishment of the OFS, which will buy back the debts, issue bonds and special deposits that will represent and store the debts sold.
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