XN000022-1995-07-07 — Page 24

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Mr Tsang noted that Hong Kong stood firm in its commitment to free trade and was always ready to assist and co-operate with the Japanesc in achieving this goal.

Mr Tsang has spent the past few days in Japan (July 5-7). He met a wide cross- section of business and political leaders, including Governor Matsushita of the Bank of Japan; Chairman Toyoda of Keidanren; Mr Toru Hashimoto, Chairman of the Federation of Bankers Association of Japan; Mr Tsutomu Hata, former Prime Minister; and other leading politicians.

Ends/Friday, July 7, 1995

Report of the Informal Group on Secondary Mortgage Market

According to the Report of the Informal Group on Secondary Mortgage Market released today (Friday) by the Hong Kong Monetary Authority, there are fertile grounds for the development of the secondary mortgage market in Hong Kong. Along with growing affluence of the Hong Kong economy and increasing home ownership, outstanding residential mortgage loans as a percentage of GDP rose from 11.4 per cent in 1984 to 29.2 per cent in 1994.

A properly developed secondary mortgage market can play a useful role in channelling long term funds (such as insurance and pension funds) to meet the rising demand for long-term home financing.

To facilitate market development, the Report has made the following recommendations:

(i)

(ii)

The structure of a mortgage-backed securities (MBS) issue should be as simple as possible.

MBS issues should preferably be rated by reputable rating agencies.

(iii) The underlying mortgage pool should broadly conform with the

benchmark pool.

(iv) Authorised institutions wishing to securitise their mortgages are encouraged to have an early discussion with the HKMA on issues such as balance sheet treatment of the mortgages and capital adequacy ratio for their MBS paper.