The Georgian Parliament has endorsed legislation on securitization along with relevant legislative changes. This law governs the conversion of extended cash assets, such as future receivables from customers, into liquid assets through the issuance of securities by business entities. The recently approved legal framework significantly mitigates risks associated with securitization while enhancing transaction transparency for investors.
In recent years, the country has proactively pursued the establishment of alternative financing avenues for businesses and the introduction of innovative investment instruments to cater to investors. Notably, the Parliament of Georgia enacted the Law on Mortgage Covered Bonds in 2022, governing the issuance of bonds backed by mortgage loans by commercial banks, marking a significant development in the realm of structured finance products.
The implementation of the securitization mechanism represents a natural progression of this overarching policy. The reform aims to enhance the accessibility of financing in the country for both the financial and non-financial sectors. Through the new law, business entities are empowered to transform consistent streams of future receivables into immediate liquid assets, thereby facilitating the expansion of their operations.
The legislation was collaboratively developed under the guidance of the National Bank of Georgia and the Ministry of Economy and Sustainable Development, based the best European practices. Specifically, the law aligns with the methodologies of jurisdictions who have mature securitization markets, including Luxembourg, and incorporates key principles from the prevailing securitization regulations within the European Union. Integral to this process, valuable support was provided by esteemed organizations such as the Asian Development Bank, the European Bank for Reconstruction and Development, and the United States Agency for International Development.
The legislative changes will come into effect on April 1, 2024.
