2 -
"The use of the Exchange Fund is appropriate as the mortgage corporation will have significant contribution to banking and monetary stability, which is consistent with section 3(1A) of the Exchange Fund Ordinance," Mr Yam said.
Thy
The paper also analyses in detail the potential risks to which the mortgage corporation may be exposed. They include credit risk, interest rate risk, prepayment risk and operational risk.
The HKMA and the Fannie Mae consultants believe that such risks can be effectively managed by introducing prudent risk management mechanism and measures. Stress tests have been conducted to assess the ability of the mortgage corporation to withstand high volatility in property prices and interest rates.
The analysis suggests that with a capital base of HK$1 billion, a capital-asset ratio of 5% and prudent loan purchasing standards, the corporation should be able to cope with extremely adverse market conditions.
In response to concerns about possible competition with the banking sector, the paper points out that the mortgage corporation will not be involved in loan origination business. It will operate only in the secondary mortgage market, and all the transactions between the mortgage corporation and the authorised institutions will be conducted on a voluntary basis.
The consultation exercise on the mortgage corporation proposal is expected to take about two months. The HKMA will seek comments from various industry associations in the banking, capital market and other relevant fields. In the light of the outcome of the consultation exercise, the IKMA will decide on whether it should proceed to set up the mortgage corporation.
End
Environmental achievements and challenges
The Environmental Protection Department (EPD) enters this month its 10th year of serving the community and protecting the environment.
Speaking at the Department's 10th anniversary cocktail reception, the Secretary for Planning, Environment and Lands, Mr Bowen Leung, said the EPD, looking back on a momentous decade, could certainly enumerate many significant achievements.