FRA approves amendment to securitization bonds, sukuk regulations

50% reduction in fees for examining requests for issuing securitization bonds, sukuk: Omran

The Financial Regulatory Authority (FRA), in its meeting on Tuesday, approved a draft amendment to some provisions of the rules regulating bonds, securitization bonds, and sukuk in the Capital Market Law No. 95 of 1992.
The amendment also adds four new financing tools in the capital market: social bonds, sustainable development bonds, environmental social and governance bonds, and gender equality and women's empowerment bonds.
Mohamed Omran, FRA Chairperson, said that the draft amendment adopted the application of the same provisions and principles applicable to the five types related to the areas of sustainable development on securitization bonds and sukuk if they are directed to financing or refinancing projects related to achieving sustainable development goals or goals with a social dimension and women's empowerment issues.
The securitization bonds must take into account that the assigning companies' policies are consistent with the principles of sustainable development or that they meet standards related to the sustainable development goals, or that the transferred financial rights are linked to projects whose purpose is to achieve the goals of sustainability, and this also applies to the beneficiaries of financing resulting from Issuance of instruments.
The authority's board of directors agreed to grant a 50% reduction in fees for examining and studying requests for issuing and offering bonds, including securitization bonds and sukuk in cases related to achieving sustainable development goals or goals with a social dimension.
He stressed the Board of Directors' determination to move forward towards offering new financing tools and issuing controls, rules, and conditions for new financing tools immediately after the issuance of the Prime Minister's decision with the proposed amendments to meet the challenges of climate change and the transition towards a green economy and environmentally friendly projects.
Omran announced the approval of the Authority's Board of Directors on the possibility of licensing funds to practice three types of sustainable development, women empowerment, and environmental activities by unlocking the private equity funds or specialized private equity funds that allow direct investment in financing or refinancing these projects. This is in addition to debt funds that enable indirect investment in bonds, securitization, and sukuk that finance sustainable projects, along with charitable funds that invest in securities related to sustainability. All three funds will be granted a discount of 50% on the fees paid to inspect, review, and study their investment requests.
He added that sustainable development bonds differ from green bonds and social bonds in that they mix financing projects with environmental and social goals together, while green bonds, which were issued globally at the end of the third quarter of 2021, focus on green projects with environmental goals.
The Gender Bonds included in the draft amendment to the provisions of the executive regulations of the Capital Market Law are a type of bond with a social dimension. The use of the proceeds from its offering must be specifically directed to financing projects, initiatives or policies that support the issue of women's empowerment and the promotion of equality between women and men and must be issued in accordance with the principles issued by the International Federation of Capital Markets ICMA. The most important characteristic of these bonds is that they provide financing for three categories of companies, agencies and bodies that focus in their policy on women's empowerment issues, and include companies, agencies or bodies whose board of directors occupy a percentage of 25% of women; or those that employ at least one third of the workforce of women, or at least one woman owns at least 51% of the capital of the company or establishment, and companies whose policies encourage gender equality in the work environment and that develop a third of their products and services to improve the quality of life for women.