Moroccan banks will soon be able to issue guaranteed loan bonds to mobilize low-cost, long-term resources.
The legal provisions that regulate these bonds came into force after the issuance of a Dahir that implemented Law No. 94.21 related to guaranteed loan bonds in the Official Gazette No. 7122.
According to the text of the law, secured loan bonds are a financial instrument with a fixed term and can only be paid in cash, issued by banks based on a license from Bank Al-Maghrib, and their holders benefit from the guarantee is made. of the hedging portfolio and of the protection of the holders of loan bonds.
Secured loan bonds are among the most sought after investment instruments in Europe. The total outstanding balance of these bonds at the end of 2020 is estimated at around 2.9 billion euros, and they have contributed to guaranteeing financial stability throughout the “Covid-19” pandemic.
The law aims to mobilize long-term and low-cost resources, which will allow banks to find new tools to refinance their long-term lending activities and make safe and long-term employment tools available to institutional investors.
Secured loan bonds are classified into two classes; Home Equity Loan Bonds that are covered by a hedging portfolio consisting of debts related to mortgage loans, and Publicly Insured Loan Bonds that are covered by a hedging portfolio consisting of debts related to loans for the benefit of communities land or loans for the benefit of the public. institutions and companies.
Secured loan bonds are issued based on a license granted by the Governor of Al-Maghrib Bank. The banking institution must address its request to the Al-Maghrib Bank, which will verify its ability to comply with the provisions of this law.
The requirements of the law clarify that the coverage portfolio of mortgage loan bonds must be made up of debts related to mortgage loans and the rights derived from them, while the coverage portfolio of public loan bonds is made up of debts related to loans granted in the interest of territorial communities or public institutions and companies.
The face value of the hedging debt must always exceed the total face value of the secured loan bonds issued and interest related thereto, and the net present value of the hedging portfolio, including loan principal and interest, must always exceed the net present value of the secured loan bonds issued. Excess coverage will be determined by regulatory text, provided that its percentage is not less than 5%.
According to the decree, the provisions of Law No. 44.12 regarding the invitation to the public to subscribe, and the information required from legal entities and entities that invite the public to subscribe their shares or bonds, will apply to issuing institutions. secured loan bonds.
In order to protect the holders of insured loan bonds, the law, notwithstanding all legislative provisions to the contrary, establishes the priority of reimbursement of the capital of the insured loan bond and the interests related to it, when the banking institution broadcaster be the subject. of a temporary administration or liquidation procedure.
Violators of the law’s new requirements face criminal penalties, including imprisonment and fines of up to Dh1 million.