ENG-2007 — Page 132

92 | Financial and Monetary Affairs

In June 2007, the HKMC established the multi-currency US$3 billion Medium Term Note Programme to raise funds in the international market. The programme will help to set a quasi-sovereign benchmark for Hong Kong to further promote the development of the regional bond market. It is a flexible, efficient and cost-effective platform to broaden the investor base and funding sources for the HKMC.

HKMC's local currency issues continued to be rated triple-A by Moody's, enhancing its ability to promote the development of the debt and securitisation markets in Hong Kong.

Development of Secondary Mortgage Market

A well-developed secondary mortgage market plays a useful role in channelling long-term funds, such as insurance and pension funds, to meet demand for long- term home financing. To develop this market, the Government established the HKMC in March 1997:

• to promote the development of the secondary mortgage market in Hong Kong;

• to improve banking and monetary stability;

• to facilitate the development of the local debt market; and

• to promote wider home ownership.

Asset Purchase Programme

Under the Asset Purchase Programme, the HKMC purchases assets from banks to facilitate their risk and balance sheet management. The HKMC is a key player in the secondary mortgage market. The total outstanding principal balance of the HKMC's asset portfolio at the end of 2007 amounted to $34.5 billion.

Mortgage Insurance Programme

The Mortgage Insurance Programme (MIP) was launched in 1999 to provide mortgage insurance cover to banks so that they may extend residential mortgage loans to homebuyers above the 70 per cent loan-to-value ceiling set by the HKMA. The maximum insurance cover is 25 per cent of the value of the mortgaged property.

The MIP has gained wide acceptance and has promoted home ownership through product diversification and improvements to servicing standards. As at the end of 2007, over 96 000 applications had been received involving an aggregate mortgage loan of $188 billion.

Mortgage-backed Securities Market

The HKMC set up a back-to-back mortgage-backed securities (MBS) programme in October 1999, which provides a platform for banks to effectively repackage their mortgage portfolios into more liquid MBS. The HKMC guarantees the timely payment of interest and repayment of principal for the securitised mortgage loans.

In December 2001, to further develop the range of products available in Hong Kong's MBS market, the HKMC established the multi-currency Bauhinia MBS