Page 342 - 2019 6th AFIS & ASMMA

» Moderator | Henny Sender
Thank you. And applying that model to emerging markets, what
emerge markets might learn from the French structure?
» Panelist | Olivier Hassler
Besides try to mobilize savings from the market and not just from
deposits, which is absolutely necessary, but with some risk involved.
Another benefit of the system is to structure the market and set the
quality standards. So, it's a non-regulatory way, but you know that better
than me, because that's what the Korean Housing Finance Corporation
does. It selects good quality mortgages only, which makes the market
sustainable. That's a very important benefit. The third thing I would
say is a need of fixed-interest rate mortgages, because when you lend to
lower-income people or lower middle income segments, these people
don't have a cushion to face and withstand interest rate hikes. I know
that's what happened in India and Pakistan, when the floating rate
went up, so did delinquency rates. So, fixed interest rate at least for five,
six, seven years, maybe not twenty, is very important, precisely for the
affordable segment. But it's not manageable if it is based on deposits,
because deposits are very liquid; if you have a liquidity issue, you have
to borrow short-term, which means variable rates. So, the big benefits of
this institution is to introduce and develop fixed-rate mortgage lending
in the system.
» Moderator | Henny Sender
Thank you. Jerry, I'm going to turn to you now. You and I have spent
a large part of our lives living in Hong Kong, watching the emergence of
China. A lot of emerging markets have looked on China as a role model.
Tell us about how you've seen the development of China; you know
it's been so fast. And they've gone to embrace a quasi-market system.
Tell us about the development of the housing market and the financing
arrangements behind it.
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» Panelist | Jerry Fang
Senior Director, Structured Finance Ratings, S&P Global Ratings
Sure, thanks. Before that, may I briefly introduce myself? I started
as a rating analyst in 2001, and since then as the primary analyst, I was
responsible for the first rated RMBS in Taiwan. Then moved to Hong
Kong, I was involved in the Hong Kong RMBS sponsored by Hong
Kong Mortgage Corporation. When I was in Hong Kong, I also covered
the Korean cross-border market. So, I was the primary analyst for a few
Korean cross-border RMBS transactions before the financial crisis; for
example, those transactions sponsored by Kookmin Bank, Citibank, Session II
a city corporation, and Standard Chartered First Bank. Then I had a
chance to leave S&P and work with a Chinese bank Huawei in Shenzhen.
Although I left the rating agency, I had a chance to live and breathe in
Shenzhen and learned firsthand observations from Shenzhen for the
Chinese community. When I rejoined S&P in 2015 again, I'm back
to cover the China and Hong Kong RMBS mortgage market and was
recently assigned to rate the Covered Bonds issued by KHFC.
So, in the past almost 20 years, my specialty and my knowledge
covered all the asset types of mainly the RMBS in housing finance
market. So, I'd like to take this chance to share knowledge and my
observations on China. I will keep it short first and then we can follow
up to see what else to discuss. I think in terms of the housing financing,
in terms of the secondary market, for example, mortgage backed
transaction, either RMBS or mortgage-backed covered bonds, China just
recently developed the market. All of your country maybe developing
this market for 20 to 30 years, but China just seriously developed the
mortgage market over the past ten years. And they just started to issue
lots of RMBS in the past two to three years. Although they develop
much later than most of the countries, I think the good thing is that they
learn from the lessons observed from other markets. I'd like to share
two things with you. One is the risk retention. Because we see some
experiences that are observed in the global financial crisis, there is the
risk retention, just to ensure the originator has the skin in the game. This
is really important. In the past, when some bankers mentioned some
2019 6th AFIS & ASMMA Annual Meeting 345