Private Sector Finance

Securitization

Securitization allows issuers to diversify funding sources, thereby reducing their reliance on bank borrowing and the resulting sensitivity to banking crises. It can provide powerful tools for balance sheet management and, particularly for banks, effective tools to optimize regulatory capital usage and efficient employment of counterparty lines. Securitization deepens capital market foundations by putting a new and powerful financial tool at the disposal of issuers and investors.

ADB’s primary objectives in the securitization market are to:

• diversify funding and investment options available to the Asian markets in order to increase product variety and reduce sensitivity to market crises
• develop large markets through support for securitization infrastructure through providing technical assistance for creation of legal frameworks and by advising on regulatory reform, both in combination with parallel involvement in pilot transactions in which ADB cooperates with commercial banks, thereby aiding knowledge transfer to the private sector
• nurture creative opportunities that arise in terms of new asset classes, innovative structures, and/or timely interventions to enable transactions with developmental impact that benefit from the involvement of ADB.

Most recent examples of PSOD’s securitization efforts are its technical assistance programs for the development of securitization laws and regulations in a number of countries (most recently in China, the Philippines and Kazakhstan), and the building of a portfolio of securitization transactions targeted to aid the securitization of NPLs, foreign workers’ remittances and consumer assets, among others. PSOD’s “bottom up” efforts in securitization should be seen in conjunction with the “top down” support which ADB’s public sector lends to Asian securitization through cooperation with regional governments and organizations.