Asian bankers call for speedy growth of credit guarantee markets, securitization

The Asian Bankers Association (ABA) is supporting the development of securitization and credit guarantee markets in Asia. Through a position paper, the ABA responded to a call by the Asia Pacific Economic Cooperation (APEC) for private sector views on the said issue.

According to Rizalino Navarro, chairman of ABA Policy Advocacy Committee and Rizal Commercial Banking Corp. (RCBC), the growth of securization will promote development of bond markets in Asia. He said Asia has a lot of savings, including about $1.3 trillion of official reserves.

However, Asian financial markets are not developed enough to channel these savings directly to Asian borrowers and are usually invested first in US and European markets before being recycled back to Asia.

"We believe that if we develop this region’s bond markets, firms and governments can directly tap these savings in local currencies. They could also obtain more long-term funding, which is what bond markets normally provide. This would enable us to reduce short-term financing in foreign currency," Navarro said.

The ABA believes securitization can help small and medium enterprises obtain financing, allowing smaller bond issues of many companies to be bundled together into larger ones with higher credit ratings, greater liquidity and lower costs.

The RCBC chair identified low demand for securitization as one of the obstacles to the growth of securization and credit guarantee markets in Asia.

He also mentioned that legal frameworks, accounting rules, regulations and tax rules need to be revised. Among the suggested ways in which these rules and regulations can be revised are: (1) consistent and clear legal and tax frameworks, (2) market-friendly regulation, (3) efforts of market participants to develop the market, (4) market stimulation, (5) low cost of funding for securitization, (6) establishment of consultative committees, and (7) a regional forum on securitization.

ABA is the largest and most active regional organization of banks in the Asia-Pacific with a membership of some 120 leading banks in the region as members. Ambassador Alfonso T. Yuchengco, honorary chairman of RCBC, is this year’s ABA chairman.