Circulars/Notifications - Banking Policy & Regulations Department  
 BPRD Circular Letter No. 03 of 2021
February 25, 2021

The Presidents / Chief Executives
All Banks / DFIs

Dear Sir / Madam,

Assets Securitization through Special Purpose Vehicle (SPV)

Please refer to BPD Circular No. 31 of November 14, 2002 on the subject.   

2.    In this regard, based on the representation of banking industry and to facilitate the development of Housing Finance as well as Capital Market in the country, it has been decided to partially amend the following clauses of aforementioned Circular, to the extent of Residential and Commercial Mortgage Based Securities (RMBS and CMBS, respectively):

  1. Clause 2 – i: The banks/DFIs, having Capital Adequacy Ratio (CAR) of at least 1.3 times of existing regulatory requirements, may establish up to 100% owned Special Purpose Vehicles (SPVs) for the issuance of RMBS and CMBS against pool of Residential/ Commercial Mortgage Loans. In this regard, while establishing such SPVs, banks/DFIs shall ensure that they are not exposed to risks, especially reputation and legal risks, on account of their SPVs.

  2. Clause 2 – ii: The banks/DFIs may use their names with their own SPVs in compliance with applicable laws, however, banks/DFIs’ names shall not be used in the RMBS/CMBS issued by such SPVs.

  3. Clause 5 –  vi (New Sub-Clause): The banks/DFIs shall not make any direct investments in the RMBS/ CMBS issued by their own SPVs and shall not take any exposure against the security of RMBS/ CMBS issued by such SPVs.

  4. Clause 6 –  vii – c: The first line of this para “An originator must not hold any equity stake, directly or indirectly, in an SPV” stands deleted.  

  5. Clause 8: The banks/DFIs may provide, adequately secured, fund/ non-fund based facility to such SPVs on arm’s length/commercial basis and in compliance with all the applicable rules and regulations. The SPV established and owned by banks/DFIs shall be considered as related party of the banks/DFIs  for the purpose of PRs for Corporate & Commercial Banking and any exposure (fund based and/or non-fund based) taken by that bank/DFI on such SPVs shall be subject to related party exposure limits as per Regulation R-1 of PRs for Corporate & Commercial banking. Where the SPV seeks fund/non-fund based facilities from other banks/DFIs, the exposure limits of single/group obligor shall apply.

3.    The banks/DFIs may sell mortgage loans to their own SPVs strictly on 'true sale' basis and the SPV or RMBS/ CMBS investors shall not have any recourse on the parent bank/DFI. The parent bank/DFI shall ensure that offering documents issued by its SPV clearly disclose to the prospective investors that the obligations of parent bank/DFI are limited only to the extent expressed in their legal agreements with such SPVs. Moreover, all transactions between the bank/ DFI and their SPVs shall be conducted at arm’s length/ commercial basis.
4.    The parent bank/DFI may act as Arranger, Structuring Agent, Administrator, Servicing Agent and Originator for its SPVs, however, it cannot act as Investor and perform the role of Trustee and Underwriter for such SPVs.

5.    All other instructions in the above mentioned circular shall, to the extent not in contradiction with these instructions, remain unchanged.


Yours truly,


(Muhammad Akhtar Javed)

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