The Australian Office of Financial Management (AOFM) has now finalised the Guiding Principles for ABSF investment and given an update on the AOFM’s progress in establishing the Australian Business Securitisation Fund along with some information on the process for submitting investment proposals to the AOFM. Background.

The AOFM says it is interpreting its mandate primarily as one of developing the non-major bank small business lending market, with the aim of attracting additional private sector investment to this sector over time.

The ABSF was announced by the Government in November 2018, and its enabling legislation was passed in April 2019. $250 million is available for investment in the current financial year, and a further $250 million in July next year. From 1 July 2021 to 2023 inclusive, the available funds will grow by $500 million per annum.

The AOFM says proposals may come to it from SME lenders or originators.

The AOFM will ask proponents to provide enough detail for it to assess the proposal against the guiding principles.

As well as providing information that will enable it to assess the proposals against the guiding principles, the AOFM will also ask for some empirical data which will cover things like loan book size, historic arrears and loss rates, the range of interest rates charged and a breakdown of security types.

The AOFM expects that it will periodically issue calls for proposals and subsequent calls for proposals would typically be issued just in advance of additional capital being made available to the Fund on 1 July each year.

The first call for proposals will not take place until the AOFM has appointed an Investment Manager.

The AOFM says it expects to set market standards in areas such as documentation and to assist with the standardisation of data collection and reporting.