The Georgian Parliament has endorsed legislation on securitization along with related legislative amendments to other laws. The new law governs the conversion by business entities of long-term exposures, such as future receivables from customers, into liquid assets through the issuance of securities. The recently approved legal framework significantly mitigates risks associated with securitization while enhancing transaction transparency for investors.

In recent years, the country has proactively pursued the establishment of alternative financing mechanisms for businesses and the introduction of new types of investment products for investors. Notably, the Parliament of Georgia enacted the Law on Mortgage Covered Bonds in 2022, governing the issuance by commercial banks of bonds backed by mortgage loans, marking a significant development in the realm of structured finance.

The implementation of the securitization mechanism represents a natural progression of this overarching policy. The reform aims to enhance the access to finance in the country for both the financial and non-financial sectors. Through the new law, business entities are empowered to transform stable inflows of future receivables into current liquid assets, thereby facilitating the expansion of their operations.

The law was developed by the National Bank of Georgia and the Ministry of Economy and Sustainable Development. The law is based on the best European practice and, in particular, is aligned with the approach of jurisdictions which have mature securitization markets, like Luxembourg, also incorporating key principles and provisions from the EU Securitization Regulation. Integral to the process of the development of the law, valuable support was provided by esteemed organizations such as the Asian Development Bank, the European Bank for Reconstruction and Development, and the United States Agency for International Development.

The legislative changes will come into effect on April 1, 2024.