Hong Kong Monetary Authority - Speech at the Signing Ceremony with the American Express Bank for the Guaranteed Mortgage Backed Securitisation Programme of The Hong Kong Mortgage Corporation Limited

Speeches

20 Dec 1999

Speech at the Signing Ceremony with the American Express Bank for the Guaranteed Mortgage Backed Securitisation Programme of The Hong Kong Mortgage Corporation Limited

Peter Pang, Chief Executive Officer, The Hong Kong Mortgage Corporation Limited

It is a great pleasure to welcome you all to this Signing Ceremony. We are very pleased to have the American Express Bank as our partner to launch this HK$ 630 million MBS issue.
It is no coincidence that American Express Bank is the first international bank to participate in our MBS Programme. Through active co-operation in the past two years, the Mortgage Corporation and the American Express Bank have forged a strong relationship as business partners. We both pride ourselves as product innovators, and adopt an innovative and proactive approach in promoting new products in the Hong Kong mortgage market, offering wider choices to consumers. Our co-operation in this MBS issue will certainly help to promote the development of the secondary mortgage market in Hong Kong.
The back-to-back structure of the current MBS programme offers significant benefits to banks in Hong Kong. It allows them to keep a substantial portion of the cashflow from mortgages while reducing the credit risk and capital cost and substantially improving the quality of their mortgage assets. It also provides them the option of off-loading any time a part of or the whole issue to suit their liquidity management or trading objectives.
Over time, a deep and liquid MBS market is essential for the healthy development of the secondary mortgage market in Hong Kong. In this regard, we are glad to learn that Dao Heng Bank, the investor of our inaugural MBS issue, and American Express Bank both intend to sell part of their MBS portfolio to help create market liquidity for the two issues. There are already encouraging signs of potential investors expressing interest in investing in these high quality securities.
The Mortgage Corporation is committed to developing a liquid market for the MBS issued under our Programme. As a major step forward, we have appointed four financial institutions - Dao Heng Bank, Deutsche Bank, JP Morgan & Co and Merrill Lynch (Asia Pacific) Limited - as market makers. The quoting of bid and offer prices by these major players will firmly establish a secondary market for our mortgage backed securities. The Mortgage Corporation will also take active steps to improve investors' knowledge of the structure and terms of the MBS issued under our Programme. This will help to encourage more widespread investor participation in the MBS market.
The MBS issue concluded today with the American Express Bank serves to further confirm the positive reception of our MBS Programme by the banking community. We intend to arrange regular MBS issues under the Programme, which is important in building liquidity for the secondary market. The Corporation plans to arrange HK$3 to 4 billion of back-to-back MBS next year. If market conditions permit, we will also explore the development of MBS products that target directly the end-investors. I am confident that the greater standardisation of the structure and documentation of MBS products through our MBS programmes will be beneficial to the long-term development of the secondary mortgage market in Hong Kong.
Thank you.

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