The Australian Office of Financial Management (AOFM) received six feedback submissions on its draft proposals, which Michael Bath, head of global markets and business strategy, said helped shape its thinking particularly on the ability of subsidy to crowd investment in rather than out.

The final guidelines comprise nine principles falling under two categories: market impact and risk management.

Under market impact, the AOFM has adapted the sustainable-impact principle to ensure the its claims to market development are material and can be substantiated. Bath explained this was a viewed as important by lenders and investors in ensuring market development.

The transparency principle has also been broadened to allow for a more incremental approach towards reaching aspirations.

Finally under market impact, the AOFM has shortened the additionality principle and removed the demonstration principle, both so as not to discourage innovation in the SME lending space, says Bath.

The final version of the guidelines also adds an institutional-quality principle. Bath said this is designed to make the operating models of the ABSF’s proponents prominent. “Shortlisted investment proposals will undergo detailed assessment including comprehensive due diligence and credit risk analysis so that the bets possible investments are being made,” he explained.

There are also amendments to the transaction-risk-profile principle, to focus on the fundamentals of a transaction pool and structure while removing reference to investment-grade structure. Bath confirmed that unrated and subinvestment-grade proposals will be considered by the ABSF.

Finally, the compliance principle has been widened to ensure proponents can comply with relevant legislation and transaction-specific reporting requirements on an ongoing basis.