RIYADH: Saudi Arabia’s financial market is approaching a regulatory step that could open a broader path for mortgage securitization, after Saudi Exchange, or Tadawul, proposed draft amendments to market rules allowing special purpose entities to issue and list debt instruments.
The significance of this step lies in the size of mortgage loans in Saudi banks, which amounted to around SR968 billion ($258 billion) in the first quarter of this year, approaching the SR1 trillion threshold, according to data from the Saudi Central Bank, known as SAMA.
This does not imply that all of the loans will be securitized. Instead, it indicates the existence of a large credit pool that can be selectively converted into securities over time, subject to regulatory, credit, and accounting approvals.
The draft amendments to market rules appear consistent with the general direction of the Capital Market Authority’s 2024-2026 strategic plan, particularly the goal of developing the sukuk and debt instruments market, supporting more than one strategic axis at the same time.
They strengthen the role of the debt market in financing, help enable investors through more diversified products, and open a wider field for institutional investors, including foreigners, to enter instruments based on cash flows and specific assets.
