Abstract
This paper tracks the development of the securitisation market in South Africa since the first securitisation in 1989. It gives a chronological account of securitisation issuance activity on the Bond Exchange of South Africa and identifies factors that have led to the development of the market. It also records some of the topical issues market participants face.Listing data from the Bond Exchange of South Africa was sorted and analysed. The views of market participants were captured through interviews and by attendance of the 2007 annual securitisation conference.The results show that the South African securitisation market has grown exponentially over the last seven years. Market participants expect this market to continue to grow, but at a slower pace, given the pressure that world credit markets are under as a result of the sub-prime crisis in the US. Market participants identified the constraints to growth as being insufficient capacity of local investors to take up the paper. From a supply point of view the South African banks have substantial securitisation capacity that is still untapped.
Highlights
Securitisation has its origins in banking and the innovation of banking products
The objective of this paper is to present a picture of securitisation activity in the South African Bond Market over the period January 2000 to July 2007 and to review the unfolding of financial innovation in the asset-backed market in South Africa
The objectives of this study are firstly to provide a chronological account of the growth in the securitisation market by examining the listing activity on the Bond Exchange of South Africa (BESA)
Summary
Bhattacharya and Thakor (1993) suggest that banking theory has largely become a maturity transformation debate where the fundamental question is whether the banks should fund their asset portfolios with deposits or by selling asset backed claims commonly known as securitization issues Whilst established markets such as the USA have used innovative tools such as securitisation since 1970, the first securitisation issue in South Africa was carried out in November 1989 by the United Building Society ( part of ABSA). This issue was based on ZAR 250 million of the bank’s mortgage book (Saayman & Styger, 2003, citing Faure, 1991). This was followed in 1991 with a private placing of instalment rental loans by Sasfin
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