peter pang : hong kong mortgage corporation mortgage - backed securities issues speech by mr peter pang, deputy chief executive of the hong kong monetary authority and executive director of the hong kong mortgage corporation limited, at the signing ceremony for the hk $ 2 billion mortgage - backed securities issue drawn under the us $ 3 billion mortgage - backed securitisation programme bauhinia mbs limited, hong kong, 27 november 2006. * * * good afternoon, ladies and gentlemen, let me first extend to all of you a very warm welcome to today's signing ceremony. today's issue of mortgage - backed securities ( mbs ) under the bauhinia mortgage - backed securitisation programme of the hong kong mortgage corporation ( hkmc ) is unique in two ways. first, this is the first time the hkmc has sponsored an mbs issue as a triple - a rated institution. on 30 october, moody's announced the upgrade of the hkmc's domestic currency rating to aaa and the hkmc's foreign currency rating to aa1. the hkmc has therefore made history as the first entity in hong kong, and so far the only one, to have a triple - a rating. the upgrade in credit ratings reflects the financial strength of the hkmc and the strong support of the hong kong sar government for the corporation. with this strong credit rating, the hkmc is well positioned to play a more active and strategic role in promoting the development of the debt and securitisation markets in hong kong. secondly, today's issue of two billion dollars marks the launch of the first - ever partially un - guaranteed mbs sponsored by the hkmc. the nine mbs issues sponsored by the hkmc so far, totalling $ 11 billion dollars, have all been guaranteed by the hkmc. these issues were all welcomed by investors. the hkmc prides itself on being a financial institution that spearheads product innovation in hong kong's capital markets. for this issue, after consulting the market, the hkmc has decided to adopt a mbs structure along the lines of a collateralised mortgage obligation. the cmo structure divides the pool of underlying mortgage assets into credit tranches or classes with different tenors and interest rates to suit the appetites of a wider range of investors in hong kong and the region. in today's two billion dollars mbs issue, the class a portion accounts for 87 % of the issue and does not carry any guarantee. class b accounts

not bore you with the details but just to highlight two important changes made in the agreement. first, the restrictions on the types of institutions that can open rmb bank accounts were lifted. this effectively means that securities firms, asset management companies and insurance companies are now free to open rmb bank accounts. second, the restrictions on rmb interbank transfers between personal accounts and corporate accounts were also removed. with these relaxations, the key hurdles that had previously limited the development of offshore rmb wealth management business have been eliminated. market players have been responding to these relaxations quickly with the launch of a wide range of rmb investment products. these include rmb - denominated insurance policies and investment funds. investor interest in these products has been phenomenal. in developing our offshore rmb business, let me stress that hong kong does not have a monopolistic power and we are also facing competition from other financial centers. bis central bankers ’ speeches however, hong kong does enjoy the first mover advantage over the others in a number of ways. over the years, the hkma has built up a very good working relationship with the mainland authorities. we have accumulated a wealth of operational and regulatory experience in rmb business. we have also developed the most advanced financial infrastructure for rmb transactions with cross - border links with the mainland. these are some of our unique strengths, and it is not easy for others to replicate them, at least in the short term. with all these developments, where should we go next? at the policy level, i believe it would be important to build an effective two - way channel to increase interaction between the rmb onshore and offshore markets. a potential area that can be explored is to promote the use of rmb for conducting crossborder real economic activities such as fdi and odi. given the significant share of hong kong in mainland ’ s fdi and odi, building such a two - way channel will also be conducive to the sustainable development of the offshore rmb market in hong kong. on this, i am glad to see that the people ’ s bank of china has, as i briefly mentioned a few minutes ago, recently launched a pilot scheme, under which odis by mainland chinese enterprises are allowed to be settled in rmb upon approval of relevant mainland authorities. as for fdi in rmb, there have already been some pilot cases ( such as mcdonald ’ s ) and it is hoped that the relevant arrangement can be formalised