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Australian Business Securitisation Fund

11 April 2019

The Australian Business Securitisation Fund (ABSF) Act 2019 received royal assent on 5 April 2019.

The ABSF is being established to increase the availability of finance to small and medium enterprises (SMEs), on more competitive terms, through investing in securities backed by securitisations of loans to SMEs among the States and Territories, including via warehouse facilities. The legislation provides for the first tranche of $250 million of funds to be made available for investment by the ABSF from 1 July 2019.

The AOFM will administer the ABSF and sees that it has a market development role, where the investment of ABSF funds, including at subsidised interest rates, is a means to an end. The AOFM is aware of the potential for investing at subsidised rates to undermine its ability to attract third party investment to the sector, which it sees as crucial to meeting the objectives of the ABSF and the market development goals of the program.

The AOFM has consulted extensively with representatives from across the SME lending market. Due to the heterogeneous nature of the market, it has concluded that a detailed, prescriptive set of investment guidelines is unlikely to be fit for purpose and so instead the AOFM will be taking a principles-based approach.

The AOFM is developing a number of principles to act as assessment criteria against which investment proposals will be evaluated. These principles will be released by no later than late May in draft form for industry comment.

While the ABSF is authorised to undertake investments from 1 July 2019, SME lenders should note that the ABSF will only be investing in securities backed by SME loans originated from the date of issue of this Operational Notice.

The AOFM is not seeking to receive investment proposals at this stage. The AOFM will call for proposals to invest ABSF funds when the investment principles have been finalised and released.

Separately, the AOFM expects to hire a number of staff on both ongoing and non-ongoing (or contract) bases. A register regarding such interest can be found at the AOFM website.

Last updated: 11 April 2019