Remittance securitization: a legal feasibility study. Whether the RA securities regulatory framework allows for an efficient securitization of remittances

Abstract

The securitization of remittances allows for more efficient use of available recourses. Instead of getting loans from international lenders, the securitization option for Armenian banks can be a less expensive and a viable alternative. For addition finance, the government of Armenia has repeatedly issued bonds, however the sovereign rating has remained low at ‘BBB’ and recently was downgraded to ‘B’ by Moody’s4. RS allows to escape the sovereign ceiling and receive higher ratings, which has been the case in Latin American countries for the last three decades. Furthermore, remittances are believed to be stable collateral and often behave counter-cyclically to recipient economy. In a force majeure event, more transfers to recipient countries are expected. Studies of remittances in developing countries suggest that remittances are predictable and can be considered as steady stream of financial flow5. The advantages of RS and its appropriateness for Armenia are evident, still no bank has engaged it. This paper seeks to analyze this problem and will be the first to examine RS in the Republic of Armenia. For a more rigorous research and argument, the analysis of laws will be systemic: from receivables contracts in general to security, insolvency and taxation laws. The final outcomes and deliverables is an analytical paper with recommendations and a presentation. Successful engagement with stakeholders, interviews with banking community, can spark interest and lead to the implementation first RS in the Armenia.