1 / 10

There is no restriction on the purchase by foreign investors of listed South African assets.

South African Securitisation - Foreign Exchange Considerations for offshore securitisation issuances. There is no restriction on the purchase by foreign investors of listed South African assets.

chava
Download Presentation

There is no restriction on the purchase by foreign investors of listed South African assets.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. South African Securitisation - Foreign Exchange Considerations for offshore securitisation issuances • There is no restriction on the purchase by foreign investors of listed South African assets. • Domestic securitisations generally listed on the Bond Exchange of SA, so no restriction on the purchase of such (Rand denominated) paper by foreign investors. • Unlisted issues (incl. unlisted tranches of listed domestic issues) denominated in a foreign currency and marketed to foreign investors, or the sale of a pool of assets to a foreign investor or vehicle, would require the prior approval of the SARB. • Such approval will generally not be unreasonably withheld. • General requirement for cash to flow into South Africa.

  2. South African Securitisation - Foreign Exchange Considerations for offshore securitisation issuances • Where an issuer issues high yield debt securities (ie above Prime plus 3%, as may be amended from time to time) and there will be foreign participation / cross-border funding, the issuer must obtain prior Exchange Control approval. • Once the transaction has been approved, cash flows associated with it (eg interest payments and capital repayments) can be remitted offshore. • Hedging of approved transactions is allowed (currency and interest rate risk hedging). • Arranging fees for foreign arrangers of domestic issues can be remitted offshore, as long as market based.

  3. South African Securitisation - Accounting Considerations • International Financial Reporting Standards apply in South Africa. • Securitisation accounting impacted by IAS39 and SIC12. • IAS 39 is relevant in determining whether the assets need to be derecognised off the originator’s balance sheet: • originator must transfer substantially all risks and rewards • SIC 12 is relevant in assessing whether the SPE should be consolidated: • where substance of the relationship between originator and SPE indicates that SPE is controlled by that originator. • Other current issue is the valuation mismatch that can arise on the valuation of assets/liabs and their underlying economic hedging instruments under IAS39.

  4. South African Securitisation – Basel II • South Africa is currently in the implementation phase of Basel II (refer timetable on next slide) • The Banks Act regulations have been rewritten for Basel II and are currently awaiting final approval. • The Securitisation Regulations have been rewritten for Basel II and are currently out for comment in draft form. The comment period closes 25 June 2007. • Full Basel II compliance will be required from 1 January 2008.

  5. South African Securitisation – Basel II

  6. Securitisation in the rest of Africa – Economic environment • Main growing economies in sub-Saharan Africa outside of South Africa are Kenya, Nigeria and Tanzania. • Limited number of commercial centres e.g. Nairobi and Lagos. • Large informal business community. • Small domestic capital markets. • Syndicated lending is a common funding mechanism. • Large residential property market, with on average only 25% owner occupied properties. • Attractive for foreign investment because of local infrastructure requirements.

  7. Securitisation in the rest of Africa - Banking industry • Banking industry represented by both local and international banks. • Difficult environment for international banks because they also have to comply with regulations in their home country. • Central Banks largely still attempting to implement Basel I concepts and therefore lots of progress required before Basel II will be implemented.

  8. Securitisation in the rest of Africa - Regulatory environment • Regulatory regime generally not well supported because the judicial process is very long. • Therefore it can take a long time to enforce security held against a mortgage loan. This creates liquidity concerns for securitisation. • Regulations can be difficult and costly to implement in the local market e.g. Know Your Customer requirements under the FSA regulations. • There is sometimes a lack of consistency in judicial decision making. • In some jurisdictions, corruption can be a major problem and is sometimes accepted as the norm when conducting business.

  9. Securitisation in the rest of Africa - Securitisation specifics • Due diligence process could be time consuming and expensive because there is often limited historical information available to assess past performance. • Spousal consent is generally required for a mortgage created over a matrimonial home to be valid. • Stamp duty is generally payable when assets are sold to an SPV. The industry is lobbying for relief from stamp duty in the case of a securitisation transaction. Kenya currently has a proposal for exemption from Stamp Duty. • Valued Added Tax is generally trapped in a securitisation transaction.

  10. Member of Deloitte Touche Tohmatsu

More Related