EuroCatalyst 2003: Competition and convergence in European housing finance and fixed-income investment

Preliminary program
DAY 2 Thursday, 23 October 2003
Minimising risk and maximising funding options

(Click here for the preliminary program for Day 1)
(Click here for the preliminary program for Day 3)

MORNING CHAIR / Eric Klopfer, GE Mortgage Insurance
SESSION 1	BOARD ROOM "CAPITAL DARWINISM AND BASEL II" Speaker to be announced
	Although implementation of Basel II in 2006 is some way off, the implications of Basel could fundamentally and permanently restructure the competitive landscape of lenders in Europe. Some speculate that the advantages gained by lenders able to comply with the favorable risk weighting advantages of the IRB approach will drive massive consolidation of weaker players and potentially eliminate smaller institutions from the market. This session discusses the main issues surrounding the implementation of Basel II, and questions the extent to which national regulators will allow lenders to opt out of Basel II and how it could be applied on a national level. The session asks to what extent domestic political concerns override the desire for uniform treatment of capital globally.

SESSION 2	BOARD ROOM -- RISKY BUSINESS: MANAGING MORTGAGE CREDIT RISK AND BASEL II
	This session highlights strategies to manage mortgage credit risk throughout Europe in a series of sessions focusing on the main areas of risk unique to mortgage lenders: Update on the European Commission position on mortgage credit risk: How does Basel II change product opportunities? What are the latest strategies and tools for managing credit risk? Navigating market and interest rate risk How does Europe measure up to global standards and who sets those standards? What solutions are there for small lenders with disproportionate volumes of default data disadvantaged by the new proposals? Are there any moves on servicing rights in Europe and how will Basel II affect servicing rights?
	PANEL	Iain Barbour, Global Head of Structure Finance Research, Commerzbank Securities Dieter Gluder, Kfw (to be confirmed) other panellists to be announced
MORNING REFRESHMENT BREAK
SESSION 3	BOARD ROOM -- INTERNAL PORTFOLIO ADMINISTRATION VS. OUTSOURCING: THE GREAT DEBATE
	Today, European banks outsource approximately 10% of their operations, with research suggesting this isn't enough. Although mortgage lending throughout Europe varies in form but not function, a "factory" approach can - and should be applied to mortgage processing and administration. However, to what extent can an external party create a better factory than lenders themselves using a straight-through-processing approach? Should non-core operations be outsourced to reduce costs and gain efficiencies that are not achievable in-house? While this session won't settle the debate over outsourcing, it will give everyone a greater understanding of both sides of the issue, and ends with an interactive group debate on which activities are considered "core" and "non-core" functions.
	PANEL	Michael Hyman, EDS Credit Services Steve Blizzard, Senior Vice President, Countrywide Financial Simon Ashby, Policy Advisor, Financial Services Authority other panellists to be announced

SESSION 4	BOARD ROOM -- SHARING LOCAL RISKS IN THE GLOBAL CAPITAL MARKET: PRODUCTS, FUNDING, RISK-SHARING AND CAPITAL MARKETS CONVERGENCE
	As lenders brace against internal and external market competition, one of the most important questions on everyone's minds is "where will new growth come from and what are emerging investment opportunities in European markets?" This session explores how and why European markets are dynamic and growing, how Basel II will affect issuance and investment and most importantly, why Europe is worthy of investor's money.
LUNCH
AFTERNOON CHAIR / Will Ross, ABN Amro
SESSION 5	FUNDING: THE OUTLOOK FOR DEBT INSTRUMENTS (MBS) IN A POST-BASEL II ENVIRONMENT
	European mortgage funding encompasses a wide spectrum of strategies including retail, wholesale, securitisation, covered bonds and whole loan sales. The debate over the superiority of "American" securitisation methodologies vs. "European" covered bond models has traditionally focused on their contradictory, rather than complementary, elements. Clearly, the execution levels of covered bonds in Europe prove their superiority as pure European funding instruments. However, Basel II will dramatically narrow the risk-weighting differential between RMBS and covered bonds, leading us to dedicate these afternoon sessions to evaluate the spectrum of competing funding strategies, including current tools and their outlook given forthcoming regulatory change. They also address the extent to which European lenders will continue their reliance on retail funding, exploration of alternative funding strategies including securitisation and look toward more radical alternatives including institutional deposit-taking.

PART 1	THE INVESTOR'S PERSPECTIVE: CHALLENGES TO INVESTMENT ALLOCATION For lenders, what is more efficient to fund - covered bond or mortgage-backed? Are regulatory changes reshaping the structured finance investment space? How will investors sustain or replace assets that mature in their portfolios post-Basel II? Will there be new issuance to replace investments? What is the asset outlook for mortgage-related investments? What are the liquidity issues between MBS and covered bonds? How do maturities factor in? How does the investor base change once risk-weighting has reached 20%?
	PANEL	Jeffrey Spencer, Merrill Lynch International Robert Paterson, Morgan Stanley Dean Witter Other panellists to be confirmed

PART 2	THE ISSUER'S PERSPECTIVE: ALTERNATIVE FUNDING STRATEGIES Basel II is expected to be finalised by the end of 2003, with a transition period from January 2004 to December 2006. In taking away the flat capital charge, regulatory capital is more keenly aligned to economic capital and theoretically creates a risk management environment in which the two can be brought together. As a funding tool, lenders will continue to securitise to diversify funding and create cash flow for non-bank lenders. While some markets (Italians and Portuguese) continue to free up regulatory capital, taking away capital constraints and incentives to securitise will not make it disappear, but will change the market dramatically. Treatment for mortgages People will look at: What are their options and what is the reallocation of their overall book? From a return on capital perspective, which business should lenders be in? At what point does Basel II require you to look at your overall offering and select businesses in terms of capital efficiency? Will Basel II force a wave of divestitures as people try to rationalize their activities
	PANEL	Ganesh Rajendra, director, Global Markets Research, Deutsche Bank AG Other panellists to be confirmed
AFTERNOON REFRESHMENT BREAK
SESSION 6	REGIONAL MARKET SESSION -- UNITED KINGDOM
	TEAM MANAGER	Michael Coogan, Council of Mortgage Lenders
	TEAM CAPTAIN	Iain Wilcox, Tower Technology
	PANELLISTS	FitchRatings, panellist to be confirmed John Sutherland, Nationwide Building Society Adrian Coles, Building Society Association Clive Wood, HSBC Trevor Pothecary, Mortgages PLC Bill Cherry, SPML (to be confirmed)

SESSION 7	REGIONAL MARKET SESSION -- NETHERLANDS
	TEAM MANAGER	Rob van den Berg, GMAC-RFC Nederlands
	TEAM CAPTAIN	Edwin Herrie, KPMG
	PANELLISTS	FitchRatings, panellist to be confirmed Nikaj Pannings, Welke Financial Bas Millenaar, Hypothekers Associatie

SESSION 8	BOARD ROOM -- CHAMPAGNE CHALLENGE: NONPERFORMING LOANS, LOSS SEVERITY AND ASSET RECOVERY: A COMPARISON BETWEEN THE U.S., JAPAN, ITALY AND GERMANY AND THE GROWTH OF SPECIAL SERVICING
	This session provides a comparison and contrast of the evolution, development and increasing need for special servicing as the last barrier of protection from loan default and losses. Comparing economic factors between the United States, Italy, Japan and Germany, the session addresses problems and solutions for high-maintenance asset losses and recovery.

(Friday, 24 October 2003)		© 2003 EuroCatalyst BV