American Express Bank announced in Hong Kong on December 20 that it would be securitizing a 630 million HK dollar (80.8 million US dollar) portfolio of prime-based floating rate residential mortgage loans under the Hong Kong Mortgage Corporation (HKMC)'s Mortgage-Backed Securitization (MBS) program.

"American Express Bank is proud to be the first international bank to participate in the program. The transaction supports the efforts of American Express Bank to expand its consumer business, especially mortgages, in Hong Kong," said Alan Tsang, general manager of the personal financial services of the American Express Bank, Hong Kong, at the signing ceremony on the program.

"The MBS issue concluded with the American Express Bank serves to further confirm the positive reception of our MBS program by the banking community," said Peter Pang, chief executive officer of the HKMC.

The HKMC intends to arrange regular MBS issues under the program, which is important in building liquidity for the secondary mortgage market, and plans to arrange MBS of 3 billion to 4 billion HK dollars (385 to 513 million US dollars) next year, said Pang.

"Dao Heng Bank, the investor of our inaugural MBS issue, and American Express Bank both intend to sell part of their MBS portfolio to help create market liquidity for the two issues," Pang said.

Dao Heng Bank invested 1 billion HK dollars (128 million US dollars) in the MBS program.

The MBS program adopts a back-to-back structure, meaning that after acquiring the mortgages from a bank, the HKMC will sell the mortgages pool to a "bankruptcy remote" Special Purpose Company which will issue MBS back to the bank.

The MBS program allows banks to keep a substantial portion of the cash flow from mortgages while reducing the credit risk and capital cost and substantially improving the quality of their mortgage assets, said Pang. (Xinhua)