until recently, currently funding, a risk factor if it Nominal rates are above over inflation. Risk and paying 5-8.5 percent over is the single source of 20 percent. liquidity premiums must inflation on indexed funding (volatility of be added to lend to banks. loans. deposits, floating interest rates) and the volume is large. Credit risk Banks assess and can Investors are not to assume the credit risk. take over the risky The system appears well tranches of securitized capitalized and solvency portfolios today. Some is not a near term may eventually assume constraint. part of the credit risk as the mortgage market matures and good data are developed on default and recovery rates. Argentina has a securitization framework that was well tested in the 1990s for mortgages, only for short term assets since the 2002 crisis Interest rate risk Interested in interest Interested in matching Interested in earning Willing to assume interest rates. interest rates on assets and positive interest rates in rate risk depending on the liabilities, and locking in real terms type of assets they margins in real terms manage Inflation risk A complex question, but Will accept only a The market for inflation Very interested in indexed are averse to payments mismatch between assets linked savings is not well instruments. Are already growing faster than and liabilities. developed, but could investing in inflation income. Debt growing grow (one of the linked sovereign bills and despite capital repayments objectives of the law that bonds. can be an created the UVI). Liquidity risk Will accept liquidity risk Interested in liquidity and Market liquidity to a certain extent, based will not tie their funds for importance depending on on the stability of core the duration of a mortgage the category of investor. deposit bases, as long as loan. Some liquidity always the yield curve makes required for proactive term transformation asset management. profitable, after taken into account the cost of capital required by the regulation applicable to mismatches. Prepayment risk Interested in being able to Will take the risk in return n. a. May assume prepayment repay the loan early for compensation, risk for a as the without excessive penalty mortgage market matures
until recently, currently paying 5-8.5 percent over inflation on indexed loans. funding, a risk factor if it is the single source of funding (volatility of deposits, floating interest rates) and the volume is large. Nominal rates are above 20 percent. over inflation. Risk and liquidity premiums must be added to lend to banks. Credit risk Banks assess and can assume the credit risk. The system appears well capitalized and solvency is not a near term constraint. Investors are not to take over the risky tranches of securitized portfolios today. Some may eventually assume part of the credit risk as the mortgage market matures and good data are developed on default and recovery rates. Argentina has a securitization framework that was well tested in the 1990s for mortgages, only for short term assets since the 2002 crisis Interest rate risk Interested in interest rates. Interested in matching interest rates on assets and liabilities, and locking in margins in real terms Interested in earning positive interest rates in real terms Willing to assume interest rate risk depending on the type of assets they manage Inflation risk A complex question, but are averse to payments growing faster than income. Debt growing despite capital repayments can be an Will accept only a mismatch between assets and liabilities. The market for inflation linked savings is not well developed, but could grow (one of the objectives of the law that created the UVI). Very interested in indexed instruments. Are already investing in inflation linked sovereign bills and bonds. Liquidity risk Will accept liquidity risk to a certain extent, based on the stability of core deposit bases, as long as the yield curve makes term transformation profitable, after taken into account the cost of capital required by the regulation applicable to mismatches. Interested in liquidity and will not tie their funds for the duration of a mortgage loan. Market liquidity importance depending on the category of investor. Some liquidity always required for proactive asset management. Prepayment risk Interested in being able to repay the loan early without excessive penalty Will take the risk in return for compensation, n. a. May assume prepayment risk for a as the mortgage market matures
P161487-06-28-2017-1498688499724.docx