Was at Bancon2011 today and couldnt but overhear the murmur of the requirement of capital of PSU Banks,considering that the govt has said tighten belts now and Banks need capital anyways (Govt must hold 51% in PSU Bank mind you), i would think that the time is right now for some one at say a large bank like SBI which is also now a force to reckon in the Mortgage market in India to look at innovative yet not 'those shadyderivativestuff' kind of product.
I would say that SBI needs to just look at the German Pfand Briefe Market.
Pfandbriefe or covered Bonds is a unique German(Prussian) Invention popularized on the streets of Westend and cafe' on alte gasse on Frankfurt am Main - The Pfandbrief (plural: Pfandbriefe), a mostly triple-A rated German bank debenture, has become the blueprint of many covered bond models in Europe and beyond. The Pfandbrief is collateralized by long-term assets such as property mortgages or public sector loans as stipulated in the Pfandbrief Act. Total volume outstanding in Pfandbriefe was EUR 806 billion as at end-2008.Pfandbrief bonds make up the third largest segment of the German bond market after public sector bonds and unsecured bank debt.
The roots of the German Pfandbrief system reach back to the year 1769. In the aftermath of the Seven Years' War (1756–1763) that had ravaged the country Prussian King Frederick the Great introduced the Pfandbrief system with a ”cabinets-order” to ease credit shortage for the nobility. Based on his royal decree, Prussia set up so-called ”Landschaften,” compulsory public-law associations of noble landowners, within the individual provinces. To refinance loans to their members Landschaften issued debentures that largely correspond with the present-day mortgage Pfandbrief since the creditor acquired a direct claim over the estates the member had pledged as security. This Pfandbrief system rapidly spread throughout all of Europe. Towards the end of the nineteenth century, it was widely adopted for the refinancing of public sector loans. The second decisive boost to the development of the Pfandbrief occurred when Landschaften outside Prussia started issuing Pfandbriefe for which all the properties lent against by the Landschaft served jointly as security. As before the loans raised by the Landschaften were not paid out in cash, but in Pfandbriefe. In 1862, the first German mortgage bank, Frankfurter Hypothekenbank in Frankfurt am Main, opened its doors. Numerous other mortgage banks followed in rapid succession in almost all German federal states. By the beginning of the twentieth century 40 private mortgage banks existed. Mortgage banks concentrated from the outset on real estate financing. The rapidly expanding towns and cities in the area of industrialization were in need of the housing construction and commercial properties financing. The 1900 Mortgage Bank Act (HBG) is deemed pioneering legislation until today. It provided a legally prescribed, uniform organizational framework for this group of credit institutions. It was in force for more than a century until the Pfandbrief Act entered into force in 2005.
In their cover business, Pfandbrief banks grant property finance, public sector, ship and aircraft loans. Pfandbriefe have an average maturity of about five to seven years. While Pfandbriefe tend to be associated with asset-backed securities they are fundamentally different. Pfandbrief cover-assets remain on the bank's balance sheet. By contrast, asset-backed securities are typically off-balance-sheet transactions. Another difference: Pfandbrief cover pools are dynamic. Their composition can and usually does change over time, depending on the maturities and on the newly registered cover assets. Due to the stringent legal provisions that govern their issuance Pfandbriefe are deemed particularly safe.
An independent cover pool trustee appointed by the Federal Financial Supervisory Authority (BaFin) records cover assets and cover asset replacements in the cover register. In the event of the Pfandbrief issuer's insolvency, Pfandbrief investors have a preferential claim on the cover assets in the cover register because cover pool assets are not included in insolvency proceedings. There has not been a SINGLE Pfandbrief default since 1901. Property financings may be included in the cover pool only up to 60% of the prudently calculated mortgage lending value. The same holds true for ship and aircraft financings. Public sector loans are 100% eligible for cover
So Mr.Whatisyour name who spokeveryfast' sir, from SBI - Innovate!
PS: The 2008 crisis - Pfandbriefe saved the DAY!
PPS: I also belive that in context of india low cost housing,middle cost housing blah blah ... this is the solution and this is definetly Financial Inclusion!
