TITLE: Colombia's Financial Regulation Unit Establishes Framework for Securitization of Micro, Small and Medium Enterprise Assets
BODY:
On May 7, 2024, Colombia's Ministry of Finance and Public Credit issued Decree 0978, which establishes a comprehensive regulatory framework for the securitization of assets originated by micro, small and medium-sized enterprises (MSMEs). The decree amends Decree 2555 of 2010 by adding Title 12 to Book 6, Part 5, creating specialized rules for MSME asset securitization.
The framework enables fiduciary companies and non-mortgage asset securitization companies to structure securitization processes backed by cash flows from MSME-originated assets. These assets may include credit portfolios, registered securities, real estate assets, agricultural and agro-industrial products, and other commodities with determinable cash flows. The decree establishes minimum standards for underlying assets, defines obligations for securitization process administrators, and sets conditions for information disclosure, trading, and investor protection.
Key features include automatic registration of securities issued through these processes in the National Securities and Issuers Registry (RNVE), subject to prior documentation verification. The framework permits fiduciary companies and asset securitization companies to establish five-year emission programs with renewal options. Originators must retain a minimum five percent of all securitized assets on their balance sheets throughout the securitization period. The decree requires simplified information prospectuses, establishes financial ratios and business indicators for risk mitigation when risk ratings are unavailable, and mandates quarterly reporting on portfolio performance and asset quality.
The Superintendencia Financiera de Colombia (Financial Supervision Authority) must issue implementing instructions within twelve months of the decree's entry into force. The decree became effective on the day following its publication.