Regulations concerning securitization and compliance with Islamic principles are discussed in this section.

Legal Framework

In general, the laws governing asset securitization include laws on the creation of a special purpose vehicle (SPV) for the sale of assets, and laws for the protection of investors from possible bankruptcy of the SPV. As the underlying assets vary across securitization transactions, additional laws specific to the asset type being securitized also govern any individual transaction.

Summary information on securitization legislation is available in the Asian Institute of International Financial Law report entitled Property Rights, Collateral and Creditor Rights, which is linked below. For market specific information on governing laws and regulations on asset securitization, please refer to the individual market home pages.

The website of the Bank for International Settlements (BIS), which is linked below, includes a report on securitization in the Asia-Pacific region. The report profiles the growth and composition of securitization in the region and its implications for liquidity and credit risks.

The Asian Development Bank (ADB) has published a working paper that considered the evolving legal framework and its potential future direction. For more information, refer to the ADB link below.

Treatment of Collateral

The underlying pool of assets in a securitization could be a pool of loans backed by real property, such as residential mortgage loans, or a pool of loans backed by movable properties, such as auto loans. The treatment of collateral versus real property, or movables, varies for the different markets in the region. Summary information on the treatment of collateral is tabulated below. This information was extracted from the report published by the Asian Institute of International Financial Law entitled Property Rights, Collateral and Creditor Rights.

Brunei, Indonesia, and Malaysia issue Islamic debt securities in accordance with shari’a rules and principles. The Ministry of Finance (MOF) of Brunei, Labuan Offshore Financial Services Authority (LOFSA) of Malaysia, and Bank Indonesia (BI) are among the founding members of the International Islamic Financial Market (IIFM).

IIFM's principal objective is to develop a shari'a-based active international financial market. Through shari'a endorsement, IIFM intends to build uniformity in Islamic products and instruments to attain global reach and acceptance.

For more information on the development of Islamic markets, please refer to the individual market home pages.