EuroCatalyst

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

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

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

MORNING CHAIR / Eric Klopfer, GE Mortgage Insurance
SESSION 1 0830-0915 [ballroom]	BOARD ROOM – THE REAL IMPACT OF BASEL II AND CAD III: MORE RULES, LESS RISK?" Gabriel S. David, managing director, Global Capital Markets, EDS Yves Burger, director, Financial Services Ratings, Standard & Poor's
	Basel II is far more than a regulatory reporting exercise -- without any doubt it will require massive restructuring, which all banks are currently trying to avoid. The real impact of Basel II is now in flight. Although the implementation of Basel II in 2006 is some way off, the implications of Basel will fundamentally and permanently restructure the competitive landscape of lenders in Europe. 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 0915-1000 [ballroom]	BOARD ROOM -- HOW MUCH IS EUROPE AT RISK? GLOBALISATION, HOUSING PRICES AND EUROPEAN MORTGAGE MARKETS
	Over the past seven years, house prices in many countries have risen at their fastest rate ever. Today's institutional investors are eagerly shifting money from equity losses into commercial property for higher-yielding assets, whilst consumers look upon their mortgage asset as a supplementary pension. From an economic perspective, rising house prices have historically offset losses of equity wealth which, in turn, support consumer spending and "prop up" troubled economies. In keeping interest rates low to cushion those economies, some argue that central banks have caused a housing bubble, with EU countries including Britain, Ireland, the Netherlands and Spain most at risk. While bubbles are never identified until after they have burst, the combination of rapidly increasing house prices and leveraged mortgage debt have raised serious concern for the industry. This session explores differing perspectives on the extent to which markets may be in trouble, with solutions on how to improve the safety and security of housing markets in the future.
	PANEL	Peter Champness, past chairman and secretary general, TEGOVA Milan Khatri, chief economist, Royal Institute of Chartered Surveyors Mitch Creekmore, vice president / director of business development, Stewart International Brian Kane, director / structured finance group, Standard & Poor's
1000-1030: MORNING REFRESHMENT BREAK
SESSION 3 1030-1130 [ballroom]	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 New mortgage markets 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? Can servicing become a source for regulatory arbitrage by carrying obligations cheaper than lenders? What is the market value of servicing without servicing rights Valuation of servicing rights Are there any moves on servicing rights in Europe and how will Basel II affect servicing rights?
	PANEL	Tony Porter, executive managing director / chief operations officer, PMI Europe Andrew Rippert, managing director, head of international mortgage, Radian Guaranty Iain Barbour, global head of structure finance research, Commerzbank Securities

SESSION 4 1130-1230 [ballroom]	BOARD ROOM – MORTGAGE ADMINISTRATION: THE GREAT DEBATE OVER IN-HOUSE VS. OUTSOURCED ADMINISTRATION
	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 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 with input from every relevant operational perspective, including: Where does the European lending industry stand on current back-office strategies What are core and non-core functions in the lending value chain How far will outsourcing in Europe go – or not The rating agency perspective: What do capital markets expect from servicers, what standards exist and are there marked differences between outsourced operations and in-house operations from the rating agency perspective? The third party servicer and outsource provider: Talking numbers: The financial realities of outsourcing Achieving straight through processing in house The regulator: Capabilities, risk and added value
	PANEL	Mike Hyman, director of business development, EDS Credit Services Limited Robin Churchouse, executive vice president, Countrywide Financial John Sutherland, divisional director, Nationwide Building Society Diane Pendley, managing director, FitchRatings Yaron Ernst, vice president – senior credit officer, Structured Finance Group, Moody's Investors Service
1230-1330: LUNCH
AFTERNOON CHAIR / William Ross, ABN Amro
SESSION 4 1330-1400 [ballroom]	BOARD ROOM – SHARING LOCAL RISKS IN THE GLOBAL CAPITAL MARKET: PRODUCTS, FUNDING, RISK-SHARING AND CAPITAL MARKETS CONVERGENCE / Alexander Batchvarov, Merrill Lynch International
	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.

SESSION 5 1400-1530 [ballroom]	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 have traditionally focused on their contradictory, rather than complementary elements. The afternoon sessions 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? How regulatory challenges change the European structured finance investment space. 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%? Will a change in the investor base drive liquidity, or something else?
	PANEL	Ganesh Rajendra, director & head – European Securitisation Research, Deutsche Bank Dominique Linder, portfolio manager / credit analyst, Allianz PIMCO Asset Management Dominic Swan, head of structured investment vehicles, HSBC Liam Coleman, head of investment & distribution, Treasury Division, Nationwide Building Society Tom Mondelaers, senior portfolio manager, Philips Pension Fund

PART 2	THE ISSUER'S PERSPECTIVE: ALTERNATIVE FUNDING STRATEGIES The European banking industry is increasingly focused on increasing shareholder value through the efficient use of balance sheet capital. The growing use of securitization in many European markets provides an alternative funding source to expand lending capacities by increasing liquidity, releasing regulatory capital, improving equity ratios and transferring risk off balance sheets into the capital markets. Among the many complex issues posed by the revised proposed Basel Capital Accord (BIS II), under the IRB approach regulatory capital will theoretically be nearing economic capital, with mortgage assets thereby consuming less capital. While the incentive to securitise will be reduced, securitization itself will remain a strong tool for capital reallocation. This session analyses funding strategies ranging from securitization to whole loan sales, featuring lenders and Treasury managers from Europe's largest institutions and issuer's of Europe's most high-profile issues to date. Basel II treatment for mortgages Funding options and reallocation of overall books From a return on capital perspective, which business should lenders be in? At what point does Basel II require an analysis of 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? Advantages, composition and pricing of whole loan sales for sellers and buyers
	PANEL	Ged Hawley, director, structured finance, Egg Maria Fregosi, group senior vice president, ABN Amro Mortgage Group Gary Gordon, director of securitisation, HBOS Claudia Schneider, vice president, securitisation, KfW
1530-1600: AFTERNOON REFRESHMENT BREAK
SESSION 6 1600-1700 [Fernando Passoa Room]	REGIONAL MARKET SESSION – UNITED KINGDOM
	TEAM MANAGER	Michael Coogan,Council of Mortgage Lenders
	TEAM CAPTAIN	Iain Wilcox,Tower Technology
	PANELLISTS	Carole Plant, managing director - UK and Ireland, GE Mortgage Insurance John Sutherland, divisional director, Nationwide Building Society Clive Wood, director of retail banking, HSBC Philip Jenks head of strategy, Halifax plc Stuart Jennings, senior director, FitchRatings

	REGULATION: How is EU legislation is increasingly impacting the UK market MARKET TRENDS AND ISSUES: 1. The case for extending long-term, fixed rate mortgages: How will the UK market create solutions for liquidity without government sponsorship? 2. Pricing strategies in a remortgaging environment • How can lenders escape the trap of current customers paying more than existing customers? • What is the impact of portfolio runoff from customer churn in the market? 3. What radical market changes are in store for the UK market and who will it affect the most? Who will the new winners and losers be. 4. Market shock: How would a fall in housing prices affect the market? 5. How UK borrowers are using home equity to manage personal spending

SESSION 7 1700-1800 [Fernando Passoa Room]	REGIONAL MARKET SESSION – NETHERLANDS
	TEAM MANAGER	Hoesli Labhart, Citigroup
	MODERATOR	Hoesli Labhart, Citigroup
	PANELLISTS	Jeroen van Hessen, executive director, NIB Capital Bank Ferdinand Veenman, managing director, capital markets & risk, continental Europe, GMAC-RFC Kevin de Baere, Standard and Poor's Stuart Jennings, senior director, FitchRatings

	1. CHANGES IN TAXATION: In 2001 the Dutch government removed tax incentives on second homes and investment property in an attempt to increase harmonization with other EU markets. Will tax incentives for the refund on mortgage interest will be reduced further or removed entirely from the market? 2. Decline in lending volumes 3. Dutch lenders move from flexible products toward standardized products. Why and what is the impact? 4. Funding alternatives: Will RMBS continue to drive the markets or will the Dutch Central Bank approve covered bond legislation or both? 5. Investor's perspective on Dutch RMBS

EVENING CONCERT 1900-2200 [ballroom]	Larry Carlton and the Sapphire Blue Band / EuroCatalyst 2003 award ceremony

(Friday, 24 October 2003)		© 2003 EuroCatalyst BV