Securitizations were structured so that any losses were first borne by lower-rated securities built from the pool of underlying mortgages. Given the structure, the assumption was that lower-valued securities would take all potential losses if borrowers defaulted. Many – but not all, of course2 – assumed that home-price declines and related defaults would have to be very extreme before the highest rated, Triple-A securities were impacted. Under this assumption these securities fully deserved the Triple-A rating given by the rating agencies. I should note that making this assumption about Triple-A rated mortgage backed securities (MBSs) proved less problematic than making this assumption about the recombined lower  2  Boston Fed researchers note some examples of contrary analysis of Subprime ABS structures written in 2005 suggesting vulnerability to even a 5 percent fall in house prices. See “Making Sense of the Subprime Crisis” by Paul Willen with Kristopher S. Gerardi, Andreas Lehnert and Shane Sherlund (Brookings Papers on Economic Activity, Fall 2008). BIS central bankers’ speeches  3  tranches of mortgage-backed securities that were billed as Triple-A rated collateralized debt obligations (CDOs).3 But many investors focused not on the security’s underlying components, merely on the ratings. Figure 8 shows that Triple-A securities remained at par values as the securitization boom gathered steam. However, Figure 9 shows that when the severity of the decline in house prices manifested itself, even the Triple-A rated mortgage securities collapsed in value.

This guideline provided the definition of the features of basic savings and basic current accounts that had to be made available by the commercial banking institutions. This was aimed at ensuring that all segments of society had access to basic deposit and transaction services at a reasonable cost. Further, a framework for microfinance was also formulated to enable the provision of micro financing by financial institutions to micro enterprises. Micro financing rates are not capped to allow for it to be commensurate with the higher administrative costs involved in providing such services to micro borrowers. This is to allow financial institutions to remain viable and to remain sustainable. Third, a diverse set of delivery channels have been introduced to ensure widespread access to financial services. The Central € branching policy has encouraged financial institutions to establish an extensive branch network across the country to ensure widespread physical access to financial services. In 2008, there were 9 bank branches per 1,000 square kilometres and 24 ATMs per 1,000 square kilometres in Malaysia. In comparison, the global median is 7 bank branches per 1,000 square kilometres and 15 ATMs per 1,000 square kilometres respectively. Financial institutions are also encouraged to apply technology to further enhance the delivery of financial services. The increased usage of internet and mobile banking has also accelerated the migration to electronic payments and has widened the access of financial services in the more remote areas. Fourth, is the enhanced financial literacy and consumer protection.