Page 336 - 2019 6th AFIS & ASMMA

My last slide. As I made all these slides, I thought if I was actually systems, are also important. The regulatory framework itself is not so
addressing the title of the panel, which is revitalization for long-term
fixed-rate bonds and secondary markets. My initial reaction to that title
was, ‘Revitalization implies you have to bring back to life when someone
died somewhere. But housing needs have never died.’ Housing needs
have always been there and I think post the global financial crisis, it's not
so much that the funding needs died, it's more that things have changed
a lot. I think there's a lot of lessons being drawn. There are changes in the
way securitization is done; it's much more focused on the funding need
rather than the risk transfer.
New instruments such as Covered Bonds, which are, in fact, very old
instruments, are gaining more global recognition after the financial crisis.
There are also changes at the overall regulatory level, such as some of
the new rules under Basel III, really focusing on liquidity management,
which is ultimately one of the big problems that led to the contagion
effects during the global financial crisis. A lot of that applies to the more
developed economies. A lot of countries I worked in didn't suffer so
much from the global financial crisis, they didn't have that contagion.
So it's more about building up from bottom-up housing markets, and in
terms of the capital markets, or recommendations we would generally
make, are to focus on some of the basics of providing an efficient capital
market that can be channeled into affordable housing.
To this end, we need to have a solid yield curve built, ask central
banks and governments to have regular issuances of benchmarks at
different price points, and have secondary trading to get a lot of price
discovery. We also need investor education, and encourage presence of
rating agencies. I think Data transparency is critically important; the
more data you have, the better you can price the risk, and you can bring
down the cost, particularly when you have data over a long period.
Generally, if you're looking at securitization, you almost need a whole
economic cycle of the upturn and downturn as to have a true picture of the
risk and how investors might want to price mortgage-backed securities.
Things like market infrastructure, including clearing and settlement
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much conducive, but having a level playing field to ensure one instrument
isn't disadvantageous versus another would be imperative, so that each
instrument is assessed on its own merits. We’re seeing markets in countries
like Egypt, and Nigeria, where we've got really nascent private bond
issuance, and these are a number of the things that have to be worked on.
From my perspective, conferences like this are great. I think Korea was in
this position like Malaysia, about 30 to 40 years ago. So, you have been through
it, you learned the lessons and are able to share some of that experience with
new countries that are just embarking on this journey, such as Myanmar, Laos, Session II
and Cambodia. I think it is hugely valuable, so thank you, KHFC, very
much again for organizing this event. And thank you for your attention.
» Moderator | Henny Sender
Before I turn to Olivier, I just want to ask Simon one or two questions
on his thoughtful presentation. Simon, you talked about sort of dual
initiatives, one at a national level and at a level working with smaller
institutions, like in Rajasthan. For countries with vast populations, say
Nigeria, is it better to start small and then try to scale up? Or, is it better
to work with the central government and start there?
» Panelist | Simon Walley
I'm pragmatic, so I have to say, whatever works, in all honesty. I also
do not believe in a cookie cutter solution. Just because something's
worked really well in Malaysia, don't export that wholesale and try and
make it fit; you need to adapt everything to local conditions. Housing
is often a preserve of local government, either municipal government
or state level government. Nigeria, for instance, each of the 36 states
has responsibility to pass mortgage laws. So, if you want results on the
ground, that's who you have to work with. The central government,
whether it's in India or Nigeria, they can set the overall envelope and
they can provide guidance. But if you want results on the ground, you
have to work with the people who make the difference, which is often
2019 6th AFIS & ASMMA Annual Meeting 339